Crypto: The Worst Case Scenario

By johnwege | johnwege | 27 Jan 2023


Most of us likely first began investing in cryptocurrency for the same reason. To hopefully become wealthy and change our lives forever. Our eyes have been set on those dreams of someday seeing Bitcoin’s price over $1 million, and seeing Ethereum go all the way up to $30k. It’s so easy to get caught up in the hype of that dream becoming a reality that we often forget to consider the scenario in which it doesn’t. What if the worst-case scenario for crypto played out?

In a perfect moment of weakness, could it cause crypto to die? What would it take? What if this doesn’t work out like we all thought it would?

Before we start, it’s important that you know that I’m as optimistic and excited for crypto’s future as anyone can possibly be. But even with that being the case, we need to always be thinking about all possible scenarios. Those who can look into the future, adjust and react quickly in the crypto market, are often the most successful. 

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There are no guarantees with Bitcoin, crypto, or anything in this market. We have all been told stories and promises about how we can become rich in this market. But there is also an equal chance this market could go to zero. That’s exactly my view with Bitcoin. I have the opinion that its price will either go to outlandishly high values, or it will be worth nothing. Naturally, I believe that the first option is more likely.

But what if right now was crypto’s perfect moment of weakness? The market was already in a deep cold winter and then the whole FTX fraud situation took place. Pushing prices even further down, but more importantly, draining a lot of the hope or enthusiasm out of the market. The US government could recognize this as their perfect moment to attack Bitcoin and crypto. The first course of action could be flat-out banning cryptocurrency in the US, which would send shockwaves and deliver a fatal blow to crypto that it may never recover from. But, the more likely course of action would be that the US government would try to implement extremely harsh and strict regulations on crypto.

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Going so far as to make KYC (know your customer) mandatory not only on all trades on exchanges. But also all wallet transactions, DeFi, NFTs, and the list goes on. Leverage trading with crypto was just banned in Canada, and that could soon come to the US as well. Because enthusiasm is so low in the crypto market currently, it has caused many to either leave the market or take a break to keep their sanity.

This means that the attention from these people is very low and their persuasive powers have weakened. This is the government's best chance to strike. They will claim that they are trying to protect users from crime, fraud, anti-laundering, and all things that were evident in the FTX situation. FTX will be their excuse to implement all of these restrictions. But the truth is that they have been wanting to do this for years. But now is their perfect opportunity, and they won’t let it go to waste. 

Many crypto analysts have declared that the whole FTX situation has set the crypto market back by at least a few years. If extremely strict government regulations are imposed, it could set the industry back 10 years, or even handicap it forever. 

After all, crypto was supposed to be the escape hatch from the rigged world against us. Finally taking back control of our own assets, and not needing anyone else to send or receive our money. Something that can’t be seized. Something that we truly own. Trustless. Finally rewarding the person for just working hard and putting their savings in Bitcoin, instead of having its value inflated away over time. If the government would try to take that away, what even be the point of being in crypto anymore? The dream would have been shattered.

That is a very dark possible future. But I promise you that there is still light at the end of the tunnel. Believe it or not, Bitcoin has been through similar situations as this.

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In the beginning, there was a real fear that people would be thrown in jail for merely owning Bitcoin. We have come a long way since then. However, there was still other fights along the way. In 2017, the blocksize wars was the biggest thing happening in crypto. There were two camps. The first wanted to keep the block size of Bitcoin the same, and the other wanted to increase it. Eventually the latter would fork Bitcoin into Bitcoin Cash. The former would win out and that is the Bitcoin that you and I know today. While that description was very short, the truth is that this matter was heavily debated and fought over.

That situation is vitally important to remember today. It clearly showed us that Bitcoiners were willing to stand up and fight for what they believed in. If the government comes knocking, we will all need to be ready to defend Bitcoin and the crypto market. The thing that you need to remember is that each day Bitcoin survives and is running blocks. It has become a day stronger. A good way to help deter these attacks from politicians is to contact your local representatives and tell them that you are a one-issue voter. The issue you care about is their views on Bitcoin and crypto. This was something that became evident to the US government last year when it tried to implement the infrastructure bill. In the bill, the government had snuck in details of crypto regulation and there was a loud uproar around the country that took them greatly by surprise. So much so that it delayed the bill by weeks. The government learned the power of crypto during that time and it's important that we remind them every chance we get.

How about you? What do you think is the worst-case scenario for crypto?

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