The so-called "one-bit catastrophe" for the compression algorithm LZ'78 asks whether the compression ratio of an infinite word can change when a single bit is added in front of it. We answer positively this open question raised by Lutz and others: we show that there exists an infinite word $w$ such that $ρ_{sup}(w)=0$ but $ρ_{inf}(0w)>0$, where $ρ_{sup}$ and $ρ_{inf}$ are respectively the $\limsup$ and the $\liminf$ of the compression ratios $ρ$ of the prefixes. To that purpose we explore the behaviour of LZ'78 on finite words and show the following results: - There is a constant $C>0$ such that, for any finite word $w$ and any letter $a$, $ρ(aw)\leq C\sqrt{ρ(w)\log|w|}$. Thus, sufficiently compressible words ($ρ(w)=o(1/\log|w|)$) remain compressible with a letter in front; - The previous result is tight up to a multiplicative constant for any compression ratio $ρ(w)=O(1/\log|w|)$. In particular, there are infinitely many words $w$ satisfying $ρ(w)=O(1/\log|w|)$ but $ρ(0w)=Ω(1)$.