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What if bitcoin went to zero?
Article

What if bitcoin went to zero?

A thought experiment helps uncover the links between crypto and mainstream finance

The Economist
The Economist, 2021
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8

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Bitcoin owners ride a rollercoaster of steep price swings, even as more and more mainstream investors add the cryptocurrency to their portfolios. The Economist examines the worst-case scenario of a bitcoin implosion and its possible impacts on the broader financial markets. Cryptocurrency enthusiasts and doubters, financial professionals, and investors will gain much from this informative look at bitcoin’s systemic risks.

Summary

Despite bitcoin’s volatility, investors of all stripes are staking claims in the cryptocurrency space.

The universe of digital monies has grown tremendously, from 6,000 cryptocurrenies in 2020 to 11,000 in 2021. The value of the asset class has moved higher as well, from $330 billion to $1.6 trillion over the same period. But the price of bitcoin fluctuates considerably: In 2021, the value moved between a high of $64,000 and a low near $29,000 across the months of April through July.

Regardless of seesawing prices, private companies and traditional investors – hedge funds like Skybridge Capital and investment banks like Goldman...

About the Author

The Economist is an independent weekly magazine covering business, foreign affairs, science and technology.

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