Every Bitcoin crash (which btw happens every few weeks) is greeted with a crop of doomsday stories that it's going to zero. Respected investors such as Warren Buffett ("It is not a durable means of exchange, it's not a store of value") and Jamie Dimon ("Bitcoin is worthless") have ridiculed Bitcoin at every chance they have gotten.
Despite the long way that Bitcoin has come, there still seems to be a fear that one day we will wake up and Bitcoin and the $2.6 trillion cryptoverse will vanish into thin air. Many on Wall Street are struggling to understand crypto's systematic risk and wondering if it could all go horribly wrong.
There is a chance crypto could be regulated out of existence. Bitcoin's concentration, where a few wallets own majority of the coins, makes it subject to systematic risk. Another danger would be a mutiny by crypto miners (~50 miners control close to 50% of the mining capacity).
Bitcoin's institutional acceptance is booming though. According to a recent study by Fidelity Digital Assets, 7 in 10 institutional investors globally plan to diversify into digital assets in the near future, with current adoption rates among institutions in Asia at 71%, Europe at 56%, and the US at 33%, with acceptance expected to grow after US approved the first Bitcoin ETF recently.
Can crypto collapse cause a financial crisis? To put things into perspective, the entire crypto market is worth about 1 Apple. Would the world be okay if Apple went into thin air? Probably but that doesn't mean a collapse isn't possible in the future. Bitcoin does seem bigger than it actually is... probably because no one (including us) can stop talking about it.
Short Squeez Takeaway: Investing in Bitcoin and cryptocurrencies has been one of the greatest investments for many over the last few years. More than institutional investors, it's made a lot of retail traders a lot of money and created a large community and following around it. Bitcoin might not be too big to fail yet but its community won't let it die an easy death.