Education By  Artem Khomenko
Normal 2845 6 Oct 2022

Could Bitcoin drop to zero?

By  Artem Khomenko 2845 6 Oct 2022
Photo - Could Bitcoin drop to zero?

The rapid rise in the value of $BTC often worries users. Crypto market participants are increasingly interested in whether Bitcoin is a pyramid scheme, and is it capable of depreciating?

The price of any asset is determined by supply and demand. If a product becomes scarce, sellers raise the price of it due to high demand. In case of excess, you have to reduce the cost in order to sell the product in a highly competitive environment.

The same mechanism is embedded in the pricing of bitcoin. At the beginning of the development of the network, $BTC coins were sold “from hand to hand”. Later, special trading platforms (exchanges) appeared, where traders “change the price”, depending on the market situation: the stronger the main cryptocurrency popularity grew, the more people wanted to buy $BTC, leading to a price increase.

Bitcoin has a limited supply. This means that the network will not be able to generate more than 21 million coins. Due to the fact that most of the $BTC was mined at the very beginning of the blockchain, many coins were “lost”. Due to the destruction of hard drives, the loss of private keys, the common "forgetting" of the crypto wallet password, it turned out that about 4 million $BTC did not move for 11 years (according to crystalblockchain). Such a long period suggests that users have not had access to their Bitcoin vault for a long time.

Wallet balances with "lost" Bitcoins (crystalblockchain)

Wallet balances with "lost" Bitcoins (crystalblockchain)

There is an opinion that due to forever lost $BTC, the price of the coin is not able to drop to zero. That is, 17% of the Bitcoin supply will never be sold. This really makes sense, since 3.7 million $BTC is essentially “burned”, which is why the available supply is constantly decreasing. But, globally, the main influence on the price is the demand for the coin.

Here are some events that may result in Bitcoin depreciation:

Satoshi Nakamoto will sell his 1.1 million $BTC. That is how many coins there are on the wallets of the first miner and, concurrently, the creator of Bitcoin. Such a number of coins can catastrophically affect the price;

Owning $BTC will become illegal. It is not enough that no one wants to buy Bitcoin. It is necessary to create a situation where users urgently have to "get rid" of tokens;

The disappearance of the Internet, electronics and digital devices.

Each of the options is fantastic in nature and extremely unlikely. Given the policy of legalization and regulation of cryptocurrencies, the exit of $BTC from the legal field is not likely to happen. If all Satoshi’s coins are sold, the community is able to benefit from this, stating that “Bitcoin is now truly decentralized.” And the disappearance of the Internet will create a situation where $BTC won’t be able to circulate in any manner.

There is also a possibility that there will be a critical bug in the $BTC code that will allow hackers to compromise the network. But 14 years of uninterrupted operation of the Bitcoin blockchain shows that it is here to stay for long if not forever.