Bitcoin is slowly gaining a lot of attentions, as everyone knows, cryptocurrencies are unstable investments that can make you rich overnight or bankrupt in an instant, accident happens at any time, and if you deliberate on them closely, the history of bitcoin has been a record of boom and bust. Bitcoin peaked at around $67,000 in November 2021, but has been volatile since hitting its all-time high. Bitcoin experienced a big crash in early 2018, then another in May 2021, and then a peak in the same month. So what happens if Bitcoin crashes? In this article, you will find the answer.
What is Bitcoin and its history
The concept of bitcoin was first proposed by Satoshi Nakamoto on November 1, 2008, and was officially rolled out on January 3, 2009.
According to the software designed by Satoshi Nakamoto and the P2P network constructed on it, Bitcoin is a kind of digital currency. It does not rely on specific monetary institutions to issue, but is generated by a large number of calculations based on specific algorithms.
Now the definition of bitcoin has changed, and people can use it to buy real-world items. It is decentralised, anonymous, available only in the digital world, does not belong to any country or financial institution, and is not restricted by geography and can be exchanged anywhere in the world. Besides, the total number of bitcoins is limited. The currency system had no more than 10.5 million for four years, after which the total number will be permanently capped at 21 million.
What would cause Bitcoin to crash
Bitcoin’s crash can be influenced by a number of factors. International developments, the war in Ukraine, interest rates, inflation and other macroeconomic factors can affect people’s confidence in investing money in risky alternative assets and cause bitcoin to crash. As banks offer higher interest rates and savings accounts become more attractive, some people may be more willing to put their money where it can earn a steady return.
It is worth mentioning that government action by regulators around the world is another important factor that could lead to a crash of Bitcoin.
What happens when Bitcoin crashes
The Financial Stability Oversight Council issued a report saying that crashes of virtual currencies on financial stability is “very limited,” possibly because the current Bitcoin ecosystem is quite small.
But let’s imagine a day when every country in the world makes trading and consumption of Bitcoin illegal, and its price crashes to zero, what would happen? Most people would agree that such a decline would cause huge financial losses for millions of people around the world.
In addition, a total crash of Bitcoin would send waves through the crypto mining industry. The bitcoin mining market alone is huge and many people depend on it for a living. If Bitcoin crashes, nearly a million miners would happen to be forced to find another source of income, leaving thousands out of work.
Hundreds of other companies will also be affected, including those involved in bitcoin payments, lending or exchanges. In short, a total bitcoin crash would be devastating for millions of people.
The current state of Bitcoin
In just four days in early June, bitcoin crashes from $30,500 to about $23,500. Meanwhile, Ethereum plunged more than 31%, and it looks like the entire crypto market has taken a hit this year.
But guess what happens these days? The bitcoin rose 11.3 per cent in early Asian trading on Friday, briefly approaching the $21,000 level, which gives confidence to bottom-hunting bitcoin buyers. Even though, the outlook for cryptocurrencies remains uncertain as risk aversion sweeps global markets because there’s no telling what will happen next.
How to deal with the Bitcoin crash
Nobody knows exactly what will happen next, many people’s lives are at stake in the rise and fall of Bitcoin, and whether you decide to sell your cryptocurrency in the face of a bitcoin crash or see the crash as an opportunity to buy more. Although we don’t want this to happen, you need to act calmly, seize the opportunity and not keep yourself in the dock, believe that the crash is only temporary, always hope for the future.
