Blockchain: Is it a hoax?  99

Bitcoin sank from $64k in April to $30k in May 2021. Today, Bitcoin

is hovering around $18k (as of 18 December 2022). Financial investors

take advantage of the heavy volatility to make huge gains. Hedge funds

are using algorithm trading to buy Bitcoin when it falls by applying a cer-

tain threshold through automatic ‘buy’ orders. As cryptocurrency is now

integrated into the financial mainstream markets, imagine that the price

of Bitcoin crashes all the way to zero. Can you feel the fear of a market

crash?

There is also a direct link between Bitcoin and alternative currencies

with regard to the rise and fall. When the Bitcoin price falls, most of the

cryptocurrency market falls. An impact on Bitcoin could be triggered

either by the shocks originating within the crypto ecosystem like a techni-

cal failure of the blockchain network or hacking on the Bitcoin exchange.

There can be more shocks to the Bitcoin market through outside factors

like clampdown by regulators or impact throughout the markets including

crypto or capital markets in response to the central bank raising interest

rates etc.

The following will be the expected outcomes and domino effect if Bitcoin

crashes to zero:

• Bitcoin miners get rewarded with a new % of Bitcoin as an incen-

tive for validating the transactions. Miners will have less incen-

tive to carry on, hence they will slow down or stop investing their

money to facilitate transaction verification through mining. It will

in essence halt the supply of Bitcoin. This will also have a reactive

impact whereby investors will most probably dump other alternative

cryptocurrencies.

• The worse impact would be on the ones who purchased Bitcoin

around the average price of about $37k. This will include most of the

institutional investors exposed to cryptocurrencies including Hedge

funds, university endowments, mutual funds and other financial

investors.

• Bitcoin crash would also wipe out private investors in crypto firms

such as crypto exchanges, and listed crypto firms on mainstream mar-

kets like the Nasdaq exchange.

• Other Payments companies like PayPal, Revolut and VISA would also

lose a substantial growing business.

• Companies like Nvidia, a microchip and GPU maker, would also lose

substantial business and take a hit on their balance sheet.

The contagious impact could also spread through several channels to other

assets including crypto as well as mainstream markets. The following is a list: