Bitcoin just experienced another shock in the market as its price suddenly dropped $5,000 in just 5 minutes, leaving global investors stunned. The main cause was identified as a 'whale' - an investor holding a large amount of Bitcoin - who sold 24,000 BTC, equivalent to about $2.7 billion, in a quick transaction.

This action created a 'flash crash' - a brief but extremely powerful decline, pulling Bitcoin's price from around $124,500 down to below $118,000, causing hundreds of thousands of leveraged investors to be liquidated, with total losses nearing $1 billion in just one day. This sudden development once again raised concerns about the extremely high risk levels of a cryptocurrency with a market capitalization exceeding $2.31 trillion.

IF BITCOIN EXPERIENCES A COMPLETE COLLAPSE, WHAT WILL HAPPEN?

Currently, Bitcoin is not only in the wallets of millions of individual investors but also appears on the balance sheets of asset management firms, major financial institutions, and even national treasuries. The question arises: If the recent collapse is just the beginning of a worse scenario - when Bitcoin actually drops to 0?

A complete collapse would not only wipe out trillions of dollars in value but also trigger a domino effect for the entire global economy. Experts warn that, unlike previous years, Bitcoin is now deeply integrated into the international financial system, and its collapse could lead to a crisis even more severe than the 2008 crisis.

A sudden drop in Bitcoin's price is sure to cause distress for many investors, but a collapse to 0 is an entirely different story. Bitcoin is now firmly fixed in the global financial system, with the involvement of large asset management firms, pension funds, and even governments.

Kevin Rusher, the founder of RAAC, remarked: “Considering that Bitcoin is deeply entrenched in the global financial system, with the largest asset management fund holding $90 billion in Bitcoin, if it drops to 0, we will witness a crisis larger than that of 2008/2009.”

Vince Stanzione, founder of First Information, added: “The next collapse will certainly be worse, as the current market is much larger, and there are more derivative products from Bitcoin such as ETFs or futures contracts.”

The consequences would be particularly severe for younger generations, who make up a large proportion of the Bitcoin investor community. For many Millennials and Gen Z, Bitcoin is their first real investment. If Bitcoin collapses, they may lose faith in the entire financial market. Rather than turning to stocks or bonds, some may completely abandon investing.

Robert Johnson, the founder of Economic Index Associates, noted: “Research shows that Bitcoin buyers are often younger than stock or bond investors. The domino effect when Bitcoin collapses is the loss of trust in the financial markets from this younger group. When someone loses faith in an organization, they tend to walk away.”

Meanwhile, older generations may view the collapse of Bitcoin as proof that traditional investment methods are correct, while younger generations might think that the entire financial system is rigged against them.

The risks could also extend to retirement security, as younger generations hold a higher proportion of their assets in cryptocurrencies compared to previous generations. The collapse of Bitcoin could wipe out a significant portion of their savings, erasing the retirement assets of an entire generation. Johnson warns: “The retirement assets of Millennials and Gen Z are set to decline sharply, as they have a higher concentration of assets in cryptocurrencies compared to baby boomers or Gen X.”

Additionally, a catastrophic collapse will lead to a wave of regulatory tightening in the cryptocurrency industry. When millions lose money, they will look for someone to blame: from exchanges, Bitcoin product issuers, to asset management firms. Political and legal pressure may force the government to intervene.

Expert Vince Stanzione predicts: “The domino effect could be increased regulation, as investors who lose money will blame brokers, exchanges, and issuers like BlackRock. Those who once thought they were 'rich on paper' will have to face the reality that their assets have disappeared.”

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