In the ever-changing cryptocurrency market, Bitcoin is undoubtedly the most eye-catching star. Since its birth, investors have placed high hopes on it, believing that it will subvert the traditional financial system and become the digital gold of the future. However, economists have issued a warning about the future of Bitcoin. If Bitcoin collapses to zero, its impact may not only be limited to the digital currency market, but may even affect the entire global economy. This article will explore this potential risk and the chain reaction it may cause.

First of all, we need to understand why Bitcoin has attracted so much attention. As a decentralized digital currency, Bitcoin has achieved transparency and security in transactions through blockchain technology, which has attracted a large number of investors and speculators. According to data, as of 2023, the market value of Bitcoin once exceeded 1 trillion US dollars, making it the world's most valuable cryptocurrency. However, there are huge risks behind this prosperity. Many economists believe that Bitcoin's price volatility is extremely high, lacks fundamental support, and may face the risk of collapse at any time.

Once the collapse of Bitcoin occurs, the first to be hit will be investors holding Bitcoin. In order to pursue profits, many people have invested a lot of money, even at the cost of borrowing money to invest. Once the price of Bitcoin plummets, the value of investors' assets evaporates in an instant, which may cause them to face huge economic pressure. For example, in 2021, the price of Bitcoin once plummeted by more than 50%, and many investors suffered heavy losses in a short period of time. This incident has caused many people to reflect. If Bitcoin collapses to zero, imagine a family investing all their savings in Bitcoin, but losing all their money. This is not only a loss of money, but also a psychological blow.

In addition to investors, the stability of financial institutions and markets will also be threatened. With the popularity of Bitcoin, more and more financial institutions have begun to accept Bitcoin transactions and even launch related financial products. Once Bitcoin collapses, these financial institutions will face huge credit risks and may trigger a liquidity crisis. For example, some hedge funds and investment companies have heavy positions in Bitcoin. Once their assets shrink significantly, these institutions may have to sell other assets to make up for the losses, triggering a chain reaction in the market. The volatility of the financial market will be further exacerbated, and investor confidence will also be severely hit.

More seriously, the collapse of Bitcoin may lead to a chain reaction in the global economy. As an emerging asset, the collapse of Bitcoin may affect the stability of the entire financial market and even trigger an economic recession. The economies of many countries are gradually adapting to the existence of cryptocurrencies. If Bitcoin collapses, companies in the relevant industrial chain will be hit hard, thus affecting employment and consumption. Take some mining companies as an example. Many companies rely on Bitcoin mining for income. Once the price of Bitcoin collapses, these companies will face the risk of bankruptcy, which will in turn affect tens of thousands of jobs.

At the same time, the impact of the collapse may also affect international trade. Many countries have begun to accept Bitcoin as a means of payment. If Bitcoin collapses, the payment method of international trade will be affected, and global trade liquidity may be suppressed. This will lead to instability in commodity prices and affect the recovery of the global economy. In addition, the economic policies of many countries have also begun to take into account the impact of cryptocurrencies. If Bitcoin collapses, governments may be forced to adjust their economic policies, which will in turn affect the coordination and stability of the global economy.

In this case, the government's response is crucial. Faced with the risk of Bitcoin collapse, governments need to strengthen supervision and establish relevant laws and regulations to protect the interests of investors. For individuals and institutions that have already invested in Bitcoin, the government can consider providing certain relief measures to mitigate the economic impact. In addition, governments should also strengthen international cooperation and jointly respond to possible economic crises to maintain the stability of the global economy.

However, despite the many risks, Bitcoin still has its unique value and potential. Many people believe that the collapse of Bitcoin does not mean the end of digital currency. On the contrary, it may be a reshuffle process in the cryptocurrency market. With the continuous advancement of technology and the maturity of the market, more stable and secure digital currencies may appear in the future. Therefore, investors should remain rational and prudently evaluate investment decisions when facing risks.

In this context, investors should have a certain risk awareness. The volatility of Bitcoin makes it a high-risk investment product. Investors need to fully consider their own risk tolerance when making decisions and avoid over-investment. In addition, investors should also pay attention to the dynamic changes in the market and adjust their investment strategies in time to cope with unforeseen market risks.

In the long run, after experiencing multiple financial crises, the global economy has gradually adapted to the challenges brought by volatility. Although the risks brought by the collapse of Bitcoin cannot be ignored, it also provides an opportunity for the further development of the financial market. With the maturity of the market and the strengthening of supervision, a more standardized and stable digital currency market may emerge in the future to promote the sustainable development of the economy.

In short, the risk of Bitcoin collapse cannot be underestimated, and its potential impact may far exceed the total market value of the currency. As investors and market participants, we need to be aware of this and remain rational and cautious. How the digital currency market will develop in the future is still full of uncertainty, but we must be prepared to meet the challenges and opportunities that may come.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

The authoritative British magazine The Economist believes that leverage, stablecoins and psychological emotions are the three main channels that caused the Bitcoin crash, and if the impact of Bitcoin's return to zero continues to expand, it is very likely to further affect the mainstream market.

According to The Economist, the number of cryptocurrencies listed on CoinMarketCap was about 6,000 a year ago today. Now, with the active DeFi (decentralized finance), it has nearly doubled to 11,145, and the total market value has also expanded from US$330 billion to US$1.6 trillion.

However, The Economist criticized that even after experiencing an astonishingly fast expansion, the essence of the cryptocurrency market's surge and plunge has not changed at all.

From October last year to the end of Q1 this year, Bitcoin has achieved an astonishing increase of 198.59%, and set a new high of US$64,800 in mid-April. However, Bitcoin fell sharply back to below US$30,000 in May, almost halving, and the current price is only hovering around US$40,000.

And every sharp drop in Bitcoin will raise an extremely important question: How serious may the negative impact be?

The impact of the collapse far exceeds the total market value of cryptocurrencies

The Economist believes that the main causes of the cryptocurrency market collapse are external or internal, such as system errors such as large-scale hacker attacks, and external factors such as suppression by regulators or the sudden end of the current low interest rate policy of the central bank. If any of the above situations occur, the cryptocurrency economy will suffer a heavy blow, and miners will lose the motivation to mine, resulting in a death spiral, causing the supply of Bitcoin to stagnate, and investors will further sell other cryptocurrencies.

As a result, a large amount of funds will be emptied.

The Economist pointed out that the investors who have only bought Bitcoin in the past year and the average purchase price is more than $37,000, including institutional investors such as hedge funds and mutual funds.

According to data compiled by The Economist, the total amount of funds that may be wiped out by Bitcoin returning to zero will exceed the total market value of the cryptocurrency market, and will also lead to the complete evaporation of more than $127 billion in funds of cryptocurrency companies such as exchanges and listed cryptocurrency companies.

Moreover, under the influence of investment tools such as leverage, the negative effects of the Bitcoin market crash will also spread to other asset markets through many channels.

The Economist wrote: It is not difficult for us to imagine a worse situation. Low interest rates lead investors to take more risks. The collapse of cryptocurrencies may cause them to start abandoning other toxic assets. In recent months, the correlation between Bitcoin prices and the stock market has even been increasing.

And as more and more traditional financial institutions have recently been involved in the cryptocurrency market, such as Goldman Sachs, which plans to launch an index fund involving cryptocurrencies, and credit card companies have also launched credit cards that support cryptocurrency payments, the relationship between cryptocurrencies and traditional finance has become closer and closer.

The Economist said that according to extreme scenario research, leverage, stablecoins and psychological emotions are the three main channels for the impact of the cryptocurrency crash to spread to other markets. Through these channels, no matter how much Bitcoin falls, it may have a wider impact.