Is Bitcoin Going To Zero?

There’s a common hesitation to buy any bitcoin because there is no shortage of so-called experts who claim that bitcoin is going to zero. Bitcoin is supposed to be the future of money, but what if it doesn’t work out that way? Could bitcoin actually be worth nothing some day?

Despite the fact that financial gurus, entrepreneurs, billionaires, politicians, and credentialed economists say that bitcoin is going to zero, millions of people around the world keep buying bitcoin anyway.

So what’s the deal?

The truth is, at earlier points in Bitcoin’s history, it was a high possibility that Bitcoin could go to zero. 100% of all previous digital money projects had all failed. There was a very small group of people working on bitcoin. Bitcoin was extremely vulnerable to attack.

If bitcoin died, it wasn’t clear if anyone would even care.

Over a decade later, the story is much different. As of 2023, it’s very unlikely that bitcoin will go to zero. Why?

The short version is that there is so many people with time and emotion invested in bitcoin that aren’t simply going to “give up” if something goes wrong at this point. Whether it’s code bugs or anti-bitcoin laws, there are bitcoiners with boots on the ground.

Every new cycle there are more hardcore Bitcoiners who don’t sell into FUD, who buy the dip, and hodl.

Nothing is for certain, but when something survives seven or eight separate 50%+ drawdowns and continues pushing towards new highs in terms of value, the burden of proof begins to shift to the detractors.

Lyn Alden

5 Reason Bitcoin Is Not Likely “Going To Zero”

1. Companies Are Building On Bitcoin

Let’s start out strong here and look at my favorite reason Bitcoin isn’t going to zero. Companies are building on Bitcoin, which means they need Bitcoin to operate. This ensures continual use of Bitcoin the asset, and Bitcoin over time. As these products gain adoption, so does Bitcoin.

Bitcoin mining companies and Bitcoin exchanges are obvious ones to think about. Mining, buying, and selling Bitcoin is their business model. They are investing hundreds of millions of dollars to make money from Bitcoin, and as a side benefit, are securing the network.

Their investor pitch decks and advertising dollars make your Bitcoin more valuable.

Plus, it’s in the best interest of these companies to promote the adoption of Bitcoin, like MicroStrategy opening up their Bitcoin For Corporations playbook, or Ark Invest hosting a 1-day virtual conference for institutions called The B-Word. What’s good for them is good for all Bitcoin holders.

Building Products For Bitcoiners

Then there are companies that build for Bitcoin and Bitcoin users. Blockstream is a great example. They are building out Bitcoin infrastructure. They host miners. They built a mobile wallet. They built a hardware wallet. They sell a kit that allows you to stream the Bitcoin timechain from the Blockstream satellite (yes, really from space), and use Bitcoin even without internet access.

Companies like Bitmain and Whatsminer are building Bitcoin miners. Companies like Upstream data are building mobile mining rigs. Companies like Bitcoin Magazine are hiring journalists to report on Bitcoin and tell Bitcoiner stories (because we certainly can’t rely on legacy media to do that!).

Integrating Bitcoin Into The Mainstream

Then, there’s a whole other type of company – a company that uses Bitcoin to do something else other than buy, sell, and hold.

For example, Zeebedee, which is integrating Bitcoin into online games like the incredibly popular CSGO, or even making their own games.

You can also use podcasts to stream Bitcoin payments per minute, listen and pay for content in a “value for value” model. Companies like Vida allow you schedule video appointments like Zoom but get paid bitcoin per minute. Wavlake lets you stream music for bitcoin.

These companies are working day and night to see Bitcoin succeed. They aren’t just going to step aside while bitcoin trends to zero. Every new founder, investor, and employee of a Bitcoin company is on Team Bitcoin.

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2. Investors, Institutions, & Politicians Are Staking Their Reputation On Bitcoin

You are not the first person to invest in Bitcoin, and that’s a good thing. In fact, some very high profile investors have stamped their seal of approval on investing in Bitcoin by being very public about it.

Firstly, you have some legendary investors such as Stanley Druckenmiller and Paul Tudor Jones who have publicly stated that they own Bitcoin. These guys are not known for making wild bets and YOLOing into positions because they read an article on Yahoo! News.

For guys like this to publicly endorse an investment means that they have some conviction in it. After all, if it tanks then that hurts their reputation as an investor.

Second, let’s look at some institutional investment.

Pension Funds Investing In Bitcoin Companies

I think it’s really interesting to read that state pension funds are investing in Bitcoin companies, such as the New Jersey pension fund buying $MARA and the California pension fund CalPERS buying $RIOT. Though they aren’t buying and holding Bitcoin the asset, they are investing into Bitcoin infrastructure, which helps secure the network for everyone.

Another investment firm you may not have heard of is Aker out of Norway. They typically invest in green energy infrastructure, so if you only listened to the mainstream media, you might be confused about why they started the Seetee company specifically to invest in Bitcoin companies and infrastructure.

Politicians Betting on Bitcoin

Lastly, politicians are buying, holding, and promoting Bitcoin. Bitcoin isn’t going to zero because people are staking their political careers on it.

In 2023, we was RFK and Vivek Ramaswamy announce that bitcoin support was a part of their platform to run for president.

Senators like Cynthia Lummis, who has publicly stated that she owns Bitcoin and even advocates for it within our government. Current SEC Chairman Gary Gensler has said some very nuanced things about Bitcoin, and Tom Emmer has said some positive things about Bitcoin as well.

Globally, we see bitcoin adoption as well. At the 2021 Bitcoin conference, we saw Nayib Bukele that El Salvador would making Bitcoin legal tender in the country. Politicians in Panama, Ecuador, and Mexico have all made pro-bitcoin statements.

It doesn’t matter where you stand in the political spectrum, bitcoin is part of the conversation.

3. Individuals Are Planning On Retiring & Dying With Bitcoin

People are planning on a future that includes Bitcoin, which means, obviously, they expect Bitcoin to exist in the future. If Bitcoin was a short-term investment, there wouldn’t be products and services catering to folks who want to retire and die with their Bitcoin holdings.

Not only are there individuals who are thinking of a future where they have to manage their estate planning so their children or grandchildren are able to access their Bitcoin, but there are also services that are cropping up that facilitate this.

Both Casa and Nunchuk have multisignature setups that allow you to pass bitcoin key ownership in the case of your death. Bitcoiners are thinking beyond just getting rich in the next year or two. They are planning for generational wealth, and companies are building tools for these long term goals.

Bitcoin inheritance planning is going to be serious business if things play out in the future as Bitcoiners imagine them playing out. Even from a conservative outlook, your current investment could be 10x or 100x or even 1000x in the next 30 years.

There are also services such as KeyKeeper IRA which allow you to invest in Bitcoin using tax optimized structures such as self-directed Traditional or Roth IRAs.

Saving Bitcoin Is Saving For My Grandkids

This is something that separates Bitcoin from a lot of different investments, let alone “cryptocurrencies”. Nobody is worried about leaving their Amazon stock to future generations. Bitcoin is a lot more like land in a sense, in that ownership comes with a sense of pride. That pride of ownership encourages long-term thinking and responsible management.

In my own experience, the idea of stewardship of this asset leads to things like contributing to the Bitcoin network in positive ways.

Nobody gives a shit what happens to their stock portfolio. There’s no ownership there. It’s a vehicle to keep up with inflation. Many bitcoiners are “all in” and actually care about seeing it succeed. This mindset is what’s going to prevent the asset from going to zero.

4. Bitcoin Has Been “Derisked”

Buying Bitcoin in 2013 was crazy for most people. In 2021 it’s normal. You can own Bitcoin in an IRA. Bitcoin companies are traded on the stock market. Companies have Bitcoin on their balance sheet. Yahoo! Finance has a Bitcoin ticker. You can download Bitcoin wallets in the app store. State retirement funds own Bitcoin-related stocks.

There’s more coming though.

Banks are getting approved to hold and transfer Bitcoin for customers. Bitcoin companies are getting bank charters. Cities are considering buying Bitcoin for their balance sheet.

Investment in bitcoin has been largely derisked, and we’re just getting started.

One interesting framework to think about is that some people and companies are not allowed to invest in Bitcoin right now, and it usually has to do with the size of investment legally allowed. Paul Tutor Jones has a great explanation of it, which basically shows that if the biggest hedge fund managers all put 1% of their assets into Bitcoin, it would be worth about $800 billion dollars, which at the time he said that, was greater than Bitcoin’s entire market cap.

Big Money Will Flood Into Bitcoin

The amount of money that hedge funds control means that they could outright buy the entire Bitcoin network multiple times over (assuming everyone sold their coins). Of course, that would never play out like that, but the point is that a massive hedge fund can’t buy any Bitcoin because it’s too small.

As Bitcoin gets more widely adopted and used, however, the price will continue to rise. It already hit a 1 trillion dollar market cap earlier this year. If the price goes 10x, we’d be at a 10 trillion dollar market cap. Suddenly, these massive investors can participate in a meaningful way. While you or I might buy $1,000 worth of Bitcoin, these guys will be buying $100 million dollar positions.

Then maybe bond traders get in on the action and reduce their exposure to low-yielding sovereign bonds and take a small Bitcoin position. As the market cap and adoption rate continue to grow, this opens to door to countries and even central banks to buy and hold Bitcoin.

Bitcoin is much less likely to go to zero as bigger stakeholders get into the action.

5. Bitcoin Is Useful

You might be surprised to learn that Bitcoin actually does stuff. It’s not just an investment that you buy and hold (although that’s a good way to use it too).

Peer-to-Peer Payments

Bitcoin is useful as a peer-to-peer payments option for people who can’t, or don’t want to use a bank account. Bitcoin is the only wan to make digital payments without permission from a 3rd party company.

One of the most clear examples of this is sending global payments.

In the US, we typically think of digital payments as Paypal or Zelle, but imagine trying to send money to countries where Paypal doesn’t operate? Or imagine sending money via Paypal in amounts less than $1?

Inflation-Proof Money

Again, as we look at the global landscape, how money operates is much different than the USA. More than 50% of countries in the world have an inflation rate of more than 10%, meaning that 100% of your purchasing power erodes after just 10 years of saving.

Because bitcoin is capped at 21 million bitcoin and it cannot be changed by a central entity, bitcoin can be a way to store value that won’t be eroded away after a decade.

Money That Can’t Be Easily Confiscated

Lastly, bitcoin works as money that can’t be easily confiscated. There are many places in the world, including Western nations like Canada and the USA, where money in the bank is not money that you actually own.

Governments can implement “bail ins” where they give a hair cut to depositors in order to save the banking system, as they did in Cyprus. The government can freeze your bank account if they don’t like they reasons or methods of protests, as they did with the Canadian Truckers. Lastly, if you have more than $250,000 in cash at a regional bank, you could get caught in a bank run and left with nothing.

I’m sure that in 20 years there will either be very large transaction volume or no volume.

Satoshi Nakamoto, 2010

Overall, bitcoin has some clear uses cases that will keep people invested and transacting. As these use cases become more clear to more people over time, bitcoin becomes less likely go to zero.

Will Bitcoin Go To Zero If The Government Bans It?

If you were going to speculate about the reasons that Bitcoin might go to zero and worked through all the ideas we covered above, it might still seem like a possibility that the government could ban it. After all, they make the rules, right? In the developing world, this is true. The government could ban Bitcoin, as they did in Nigeria, or threaten to ban it, as they have done repeatedly in India.

What typically ends up happening in those situations is that a black market develops, thus increasing the price of Bitcoin in that country. If demand holds and supply dries up, then the number goes up. Bitcoin is a peer-to-peer technology that you can trade without the help of exchanges, so even if the government bans the onramps to buying and selling Bitcoin, it still exists.

Bitcoin continues to trade globally even if a single country bans ownership or trading.

We saw this play out in another way in China as recently as July 2021, when China banned Bitcoin mining within the country.

Again, Bitcoin did not go to zero. Miners unplugged their machines and sent them overseas to places like Texas, Canada, and Kazakhstan. Though as I’m writing this, the full migration hasn’t been completed, the network is still functioning, and the only thing that changed is that Chinese companies no longer can participate.

You can’t ban Bitcoin. You can only ban yourself from it.

If Western governments like the US or the EU banned Bitcoin, we would probably see much more violent price action. If the bans continued, the price could remain lower than it is today. What price would that be? Nobody knows. I’m confident that if The US banned Bitcoin it would be lower than $30k.

However, in the West we have rule of law. We have functioning courts. You can’t just ban something through dictatorial edict. There’s a process.

Between all the individuals, companies, and organizations that own or use Bitcoin there’s a lot of money on the line if there were to be an outright ban. Think of it like a moat to protect against the enemies of Bitcoin. You can be sure that any proposed ban would go to the courts.

Also, consider what the precedent would be for banning Bitcoin? Technically, you never take possession of anything – you just own the key. If you memorize your key, are you then in possession of illegal thoughts? Even if you think about mining, could the state really ban the use of electricity for certain specific things?

At this point in history, it does seem like governments can pretty much do what they want, as long as it’s under the guise of keeping us safe, but I think it would be pretty hard to make a case for banning Bitcoin in a court of law.

Even if they did, there would still be more than 100 other countries around the world where it would be legal, and since you can store Bitcoin in your mind by memorizing 12 words, you could see Bitcoiners start to take more frequent vacations and buy properties in these jurisdictions.

Assuming none of that makes sense to you, here’s the SEC chair (2021) Gary Gensler talking about creating “rules to the road” for Bitcoin. You don’t really try to make rules for something you plan on banning.

I’m not saying I’m happy about the USG getting involved in Bitcoin regulation, but an outright ban is unlikely. The fight for Bitcoin now moves to other more specific topics like the right to financial privacy, or trading and custody rules. Of course, Bitcoin is a decentralized and distributed technology, so regulations they make in the US will only apply to those living here, and “real Bitcoin” (without rules) will still exist if you live outside the jurisdiction of the SEC.

Final Thoughts

If Bitcoin were to truly crash to zero, it would mean either that it became impossible to trade Bitcoin or exchange it for goods and services, or that buy-side liquidity fell to zero for some reason. One of the only plausible scenarios that could cause this is Bitcoin being banned by all world governments, potentially rendering it illegal to own or use—as is already the case in a handful of countries.

This would also require taking down the entire Bitcoin network, rendering all nodes offline—including the ones in space—and making it impossible to set up new ones. Theoretically, this would make it impossible to transfer Bitcoin and would prevent underground trading, likely rendering Bitcoin worthless—but this would be nearly impossible to accomplish.

Decrypt [Source]

It’s pretty unlikely that the Bitcoin network will disappear completely in the future. Bitcoin has some very clear use cases other than growing your purchasing power over time. People are spending their time, money, and energy to build things on Bitcoin, or that rely on Bitcoin. The network is not going to disappear over time.

There seems to be a mentality for folks unfamiliar with Bitcoin that you must be “all in” or not. That’s why they want to know if the price of Bitcoin is going to zero. They are worried about losing the shirt on their backs by betting the farm on Bitcoin. You don’t have to do that.

Choose an allocation to Bitcoin based on your risk tolerance, investing time horizon, and financial goals.

If Bitcoin truly does go to zero and you lose 1% of your liquid net worth, you are not going to go broke. You aren’t going to lose the house. Your friends and family aren’t going to make fun of you relentlessly for investing in something stupid.

Investing in anything involves risk. What if Apple goes bankrupt? What if Netflix is the Myspace of streaming movies?

In the first decade of Bitcoin’s life, whether Bitcoin was Ponzi scheme and derived its value from Greater Fool’s Theory were understandably good questions to ask and debate. Nobody had seen something like Bitcoin before, so your average person was skeptical.

The debate is over now. Bitcoin is here to stay. We can talk about how much a single Bitcoin is worth, how widely it will be adopted, or what its use cases are, but it’s not going to go away.