Now that I’ve got your attention…
Being involved in something as amazing as Bitcoin, you tend to hear a lot of comments from naysayers. Usually, these people have never used Bitcoin before and don’t know anyone who ever has, and frankly it’s very obvious.
The well-meaning advice you often hear from naysayers is: “Don’t buy Bitcoin, it could go to zero tomorrow!”
This is technically true – it is possible for any currency to lose most or all of its value overnight – but is a silly thing to say for two reasons.
The first reason is that almost nobody receiving this “advice” is thinking of putting their entire life-savings into Bitcoin. Usually the person being advised is just starting out with Bitcoin, and they were looking to buy just 0.1 BTC so they could experiment. Anyone can afford 0.1 BTC; if it drops in value or goes up in value it doesn’t really matter.
You might as well be saying “Don’t buy that chocolate bar – it’ll go off in a few days and if you don’t eat it by then you will LOSE YOUR $2”.
Let’s give some credit to Bitcoin: It is not so fragile that it would plausibly lose all its value. Mistaken hard forks, transaction malleability, Mt Gox, spam transactions, the 2013 bubble and 2014 bear market, Silk Road, stress tests and the block size debate… none of these things killed Bitcoin or permanently shook confidence in Bitcoin.
The risk of investing in Bitcoin is certainly non-zero. You could purchase bitcoins for $370 and then find the price going down to $320. But $370 to $0? Or even $370 to $70? Very improbable.
You can certainly do worse on the stock market. Companies regularly crash and burn, taking their stocks down to zero. However nobody says “Don’t invest in the stock market, your shares could go to zero” – no, they say “Don’t invest what you can’t afford to lose” which is good advice.
What we were so pessimistic about the property market? “Don’t buy property, it might burn down.”
You could really make fun of this statement by filling the following mad-lib:
“Don’t (do something), because (unlikely event)”
“Don’t buy a bicycle, you might get into an accident and lose your legs and then not be able to ride your bicycle!”
“Don’t scan in your driver’s license, hackers might get into your computer and steal it and use it for identity theft!”
“Don’t buy an Xbox One, there’s a chance Microsoft will abandon it and no more games will be made for it!”
“Don’t read a book about WW2, maybe the author is a Neo-Nazi and you’ll get offended!”
To get back onto a serious note, I think it’s more likely that the Australian dollar will “go to zero” than Bitcoin. Think about it: The supply of the Aussie dollar is regulated and “backed by the government” yet it has lost 30% of its value over the last couple of years. And not only is it projected to shrink further, but the government even seems to be quite happy to allow it to do so. This might sound far fetched, but in the event of insurrection or domestic war the Aussie dollar could even be replaced with something else and become worthless.
Bitcoin? Not so much. Bitcoin is not linked to any one economy and it’s not very much affected by single-government decisions. If the USA falls over, or China collapses, all other countries would continue trading and accepting Bitcoin. You might see a blip in the price, but the funny thing about Bitcoin is that it tends to do better when other currencies are in trouble. Bitcoin went up 20% during the Grexit crisis.
Bitcoin could however be brought down by a major failure in its security design – which is very unlikely to happen given the amount of attention and auditing it has had to ensure everything is secure. And in any case if you are only investing what you can afford to lose, or you want to experiment with Bitcoin, then your loss won’t be the end of the world.
I would worry more about the other scenario: The one where banks become responsive, responsible and likable institutions. The economies of the world rise again and fiat currencies are made to slowly deflate rather than inflate. And all persecution and injustice is wiped off the face of the planet and we finally reach the dream of world peace.
That’s the most likely scenario in which Bitcoin will go to zero.