Cryptocurrencies like Bitcoins are the most valuable assets right now. The chances of going negative in value are not possible, not at least in a few coming years. If there is a new technology in the market that can replace cryptocurrency, it might lead to a decrease in price, but going negative is not likely to happen anytime soon. Prices of digital currencies are rising every week.
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Can the value of cryptocurrency go negative?
It’s not the possible value of bitcoins or other cryptocurrencies that will go negative. Not only cryptocurrency, but any asset value also will not go negative. While investing in these digital assets like Bitcoins, you must know that the price you are paying to buy them is based on the market price. Along with the market price, there are a few extra fees charged by the crypto exchange platform.
The market value is the price people are willing to pay based on the demand and supply of these cryptocurrencies. The lowest price any digital asset can reach is zero. This is the case when there is no demand in the market, but supply is abundant. When the value of one asset decreases, eventually, the price of another asset increases based on the demand for it in the market.
Few cryptocurrencies are actually very useful, and looking at the current scenario, the demand for a few cryptocurrencies is very high. Also, chances are more likely to be less than their value will go negative. These digital currencies are highly volatile, and there are always fluctuations in their prices. These fluctuations are based on the speculations made by top influencers of the crypto market.
The demand for cryptocurrency will be based on the market forces, but the supply will be there in the market through mining, and you can get paid with cryptocurrency for providing products or services. These crypto assets will always have value. In the worst case, it can be zero but not negative.
Why the value of cryptocurrencies cannot go negative?
There are quite a few reasons why cryptocurrencies cannot go negative. A few of them are stated below:
1. Every digital currency has a value
Firstly, most digital currencies like Bitcoin use peer-to-peer technology, and to make a transaction, some additional fee is charged whenever you spend your crypto coin. That is the actual price of the cryptocurrency apart from the market value. You must have additional Bitcoins to pay for this additional fee for processing your transactions. This fee is commonly called a miner/ spending fee.
This fee is determined based on the market value of the crypto asset. If you don’t have this additional fee in your wallet, you won’t be able to make the transaction, and it will be rejected. There is no option that your wallet will show a negative balance if you don’t have enough coins.
For example, if you want to spend $5.00 worth of bitcoins and the additional miner fee of $0.50, then you must have a total of $5.50 worth of bitcoins in your wallet, or else you won’t be able to make the transfer. Hence, you can say the price of the cryptocurrency will not go negative.
2. The investment value of these digital currencies
The value of these digital currencies is completely based on market forces, and the value is automatically determined by the traders who are buying and selling these digital assets. While buying cryptocurrencies, people hope the price will increase in the future, so they can sell it later at a higher price.
On the contrary, people have the tendency to sell these digital currencies before the price reaches zero and then end up making huge losses. Hence, by the time the price of these crypto coins will reach zero, there will not be any demand in the market, and the supply will stop eventually if there is no demand.
3. Short-selling of assets
Short selling is a common technique used by traders/ investors where they sell an asset that doesn’t belong to them in the market, and then they wait for the value of the asset to drop further, and before it reaches zero, they buy the asset again, so they can keep the difference after repaying the original assets.
The same concept applies in the case of cryptocurrency. Some traders or investors tend to sell their crypto coins in the market if they see the price of digital assets is speculated to go down. A majority of crypto investors sell their cryptocurrencies and then purchase them again when the price is at the lowest.
4. Buying on Margin
Buying on Margin is another concept used by traders/ investors. This is a technique where assets are purchased at a margin price when the value is the lowest and then sell it when the price of the asset starts increasing. In this case, an investor borrows money from a bank or a broker, and when the asset is sold at a higher price, the difference in value after repaying the lender is profit for the investor.
In the case of cryptocurrency, crypto traders purchase a potential crypto coin which is speculated to hike in value in the future, and when the price is high, they sell the crypto coin to receive higher profits. In this way, the price of the cryptocurrency can fluctuate, but it cannot go negative until there is demand for it.
The Bottom-line
These are the reasons why cryptocurrencies cannot go negative. In the present scenario, cryptocurrency is an innovative concept that has plenty of future potential and possibilities that will keep the market demand high. In coming times, the value of cryptocurrency will be more likely to rise, and a wide future lies ahead of us.
