Can the price of bitcoin go to zero?

Bitcoin has been on a roller coaster ride for months now, and the question of how low it can go is still up in the air and worrying financial regulators.

Can the price of bitcoin go to zero?
Bitcoin tree. Image by the_miss_artem from Pixabay

The growth of the cryptocurrency market is undeniable. Since bitcoin's recorded creation in 2009, the number of cryptos is multiplying year on year. In a span of just 12 months, this type of asset went from just over 6,000 to almost 11,600. So far, the value of this market has amassed US$2.3 trillion - something like twice the gross domestic product of Mexico - of which 41.5% makes up the capitalization of bitcoin. This is why the first decentralized cryptocurrency is attracting the attention of detractors, economists, regulators, entrepreneurs, investors, and enthusiasts.

The sophistication and volume achieved so far have not been tamed: on April 15, the price of bitcoin stood at US$63,410.3, a record high. Three months later, the price fell to US$29,865.5, a 53% decline, and thereafter its price rebounded (again) to the US$50,000 mark. It probably won't be the last streak of ups and downs recorded in the world of the "wild west" - as the U.S. Securities and Exchange Commission (SEC) dubbed cryptos - but as with the 2018 crash, the question of how low bitcoin can go remains up in the air and worries financial regulators.

An example of this relationship can be seen in technology companies listed on the stock market, such as Tesla or Microstrategy, which have integrated this cryptocurrency into their reserves. In addition to this interaction, large investment banks such as Wells Fargo, JP Morgan, Morgan Stanley, and Goldman Sachs have given in to pressure from their clients and are drawing up plans to offer funds with exposure to cryptocurrencies. Even Visa and Mastercard are beginning to adopt cryptocurrencies on their platforms.

Globally, cryptocurrency adoption grew more than 880% at the close of the first half of 2021 versus the same period last year, with cryptocurrency exchange platforms pushing this adoption in emerging markets.

Interest in bitcoin is no exception in Latin America and Mexico. In 2016, electronic wallets for storing and transacting bitcoin and other cryptocurrencies numbered in the thousands. Currently, the figures are around 20 million in the region and two million in Mexico in platforms for buying and selling cryptocurrencies. It is enough to see the offers to buy and sell bitcoin to realize the losses that investors and fans of these cryptocurrencies could have if the price were to reach zero.

It is not fortuitous that in June the authorities in Mexico warned, in unison, that financial entities "are not authorized to carry out and offer operations with virtual assets to the public", after Banco Azteca, owned by tycoon Ricardo Salinas Pliego, a bitcoin enthusiast, launched the idea of accepting this cryptocurrency. This blockade reduces, for the time being, the Mexican financial system's exposure to bitcoin. However, bitcoin adoption among investors is growing at an accelerated pace year after year along with the supply of assets. Even bitcoin investments include the real estate sector. In Jalisco, the company Agora Desarrollos promoted on its social networks the sale of an apartment with bitcoin.