Crypto Crash: Could Bitcoin Fall Below Zero Like What Happened With Oil?

One of the more bullish arguments before the recent cryptocurrency market crash was that bitcoin (BTC) had never tested a previous cycle’s all-time high before a halving event. And then this time it fell below $19,000, the pre-halving high of 2020.

While the incident sparked existential fear of a total meltdown, it also raised questions about whether bitcoin’s price could ever fall below zero and have a negative value like oil did for a while. the peak days of the pandemic.

“To suggest that the price of bitcoin could fall to zero…is almost unthinkable,” said Whitney Setiawan, research analyst at Crypto Exchange. Bitrue. “Its sourcing is unaffected by today’s global supply chain bureaucracies. The supply of crude oil is nearly endless and this can adversely affect the price one is willing to pay, which can lower one’s price.

Setiawan said bitcoin’s technical design prevents it from hitting zero, even when “overall market sentiment may continue to drive a sell-off.” The US Commodities Exchange Act concluded that digital currencies such as Bitcoin are a commodity, just like oil.

Bitcoin falls 70%, fears of a total collapse

In 2020, at the height of the coronavirus pandemic, the price of oil in the United States turned negative for the first time in history, falling to minus $37 per barrel. This meant that oil producers had to pay buyers to remove the goods from them, fearing that storage capacity would run out. Oil demand has dried up due to shutdowns that have kept people at home.

As the price of bitcoin has fallen sharply over the past few weeks, traders and miners have been keen to offload their holdings to avoid facing massive losses. And perhaps worse, a LUNA-style meltdown.

Bitcoin has fallen 70% since hitting a high of $69,000 in November 2021. At press time, BTC was trading at $20,400 after rebounding from an 18-month low of around 17 $800. This is below the price of $19,000, a high reached in 2020 before an event that reduced the amount of bitcoin minted known as the “halving”.

The carnage in the crypto market is in part caused by pressure from macroeconomic forces, including rising inflation and a succession of interest rate hikes by the US Federal Reserve. Additionally, the Terra contagion is only just beginning to be felt, with a number of crypto heavyweights including hedge fund Three Arrows Capital (3AC), lenders Celsius and Babel Finance facing security issues. solvency.

“Bitcoin has no storage fees, so it won’t go to zero”

Styliana Charalambous, head of investments and market research at fund manager Pure, said bitcoin’s historic price reversal could not be compared to that of oil because it cost almost nothing “to traders and investors to keep their bitcoin in their wallets”. speak to be[In]Crypto, Charalambous explained:

“The reason why oil had a negative value at one time is that oil reserves around the world were filling up quickly. People were willing to pay to remove the stock of oil from their warehouses. On the other hand, it is technically impossible for BTC to have a negative value.

Charalambous said cryptocurrency values ​​could fluctuate wildly depending on market speculation, but values ​​could never go below zero. “That would basically mean you would have to pay someone to take your coins or tokens,” she said.

Brian Gallagher, co-founder of Web3 infrastructure company Partisia Blockchain Foundation, said it’s hard for BTC to go below zero “because it’s a hard currency supply.” But “companies that are over-indebted could go into debt and be sent into bankruptcy and liquidation of their assets to pay their creditors”, he detailed.

The technology remains strong

The fundamental underlying technology behind Bitcoin remains solid and has weathered much turbulence since its inception over 13 years ago, experts say.

Cryptocurrency markets are struggling for confidence after the collapse of the Terra blockchain in May. The situation has caused genuine fear about the long-term viability of cryptocurrencies, resulting in a loss of over $2 trillion in value over the past six months.

“His [Bitcoin] a key new financial tool that has long-term value and ease of use. I’m sure once global markets stabilize and recover, bitcoin will recover even faster,” Vasja Zupan, president of Digital Asset Exchange Matrix, told Be.[In]Crypto.

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