The latest upheaval in the crypto market has Bitcoin losing $2,000 in value, while Bitcoin Cash gains the same amount.
This is a tale of two Bitcoins. After a fork in August that created Bitcoin (BTC) and Bitcoin Cash (BCH), we have reached yet another crossroad. While another hardfork was planned around middle of November to boost Bitcoin’s block size, this fork is now dead in the water. The lack of consensus among the Bitcoin community was cited as the reason for abandoning the so-called SegWit2x plan.
Abandoning the fork lifted the Bitcoin price from $7,200 to $7,800 as traders realized their worst fears (an ugly chain split) would be avoided. However, excitement hasn’t lasted. Bitcoin is now trading at around $6,000 at press time, as traders and investors fear that SegWit by itself will not create enough capacity to scale. Indeed, at the time of this writing, there are over 140,000 unconfirmed Bitcoin transactions.
Bitcoin Cash was the surprise winner in all of this, at least temporarily. The currency which had been drifting steadily downward was lifted as high as $2,600 in a dramatic pump following the news of SegWit2x’s cancellation. While the price has since experienced a 50% retrace, spectators were stunned at the sudden rise.
An existential crisis for Bitcoin
The lack of a clear path for Bitcoin’s scaling issues are having a serious impact on Bitcoin’s price. As more users discover Bitcoin and its popularity increases, there is a growing danger that it will be a victim of its own success. We talked with Charles Hoskinson, CEO of Input Output Hong Kong, who elaborated the challenge facing Bitcoin:
“Bitcoin is at an existential crisis where it has grown large enough and attracted enough quality people to provide very clear yet different roadmaps for the future backed by passion, money and brilliance. From one perspective this creates friction and has resulted in splits. From another we get to see in parallel both philosophies play out in real time and compete for market share.In the end it’s impossible to say who will win, but this is predictable sign of maturity rather than a symptom of chaos. No ecosystem can keep everyone happy nor can it satisfy divergent visions. So they have to find a way to split like so many open source projects before then without destroying the value already accumulated and the underlying communities.”
More users but also more confusion
Bitcoin’s high prices may have drawn users like bees to honey but many are likely not savvy. There is a high degree of confusion among these users that is making matters worse. A lot of them can’t probably tell the two Bitcoins apart from each other. We talked with Fran Strajnar, CEO of Bravenewcoin, who thinks we are going through yet another round of FUD (fear, uncertainty and doubt). He tells us:
“I think the current FUD is very confusing to the millions of new people pouring into the crypto space for the first time. ‘Bitcoin,’ ‘Bitcoin-Cash’ is enough to confuse people as it is.”
BCH a classic pump and dump?
Altcoins are no stranger to the phenomenon of pump and dump. There are people out there who have the ability to increase the price of a particular coin and when there is enough buzz around a coin, it is simply the matter of dumping it and making a neat profit. Kumar Gaurav, Chairman of Cashaa has this to say on the recent increase in BCH (BCC) prices:
“The quick rise [of BCH]from around 600 to 2400 USD in a few days makes it look like a typical artificial pump which was already being followed by a dump back to $1300 USD within 30 min. As compared to the FX market, the crypto market is still small, it is easy to do that and can not be used to estimate the future of BTC vs BCC.”
Gaurav is of the view that Bitcoin has gained relative maturity with the passage of time:
“Compared to that, Bitcoin has already overcome many challenges, keeps following its pattern of steady rise and its current downwards push is one of the many only temporary ones such as in July and September this year, so we can expect it to be back on the way to 8000 USD soon, whereas [BCH] is too new to estimate whether it will grow in the long term or whether the current move was one of the typical altcoins’ pump and dumps.”
Fran also adds his voice:
“However I expect Bitcoin to be ‘just fine’ if it stays above $4500 as the smart money realizes that BCH has no advantage, support or adoption like BTC has.”
Both the Bitcoins can exist peacefully
The good news is that as more people discover cryptocurrencies, there is space for both flavours of Bitcoin to exist and prosper. As for the bickering within the Bitcoin community, you can’t really rule out more forks or more Bitcoin variants in the future either. This is just the way cryptocurrencies are. As Hoskinson puts it:
“Bitcoin Cash seems to be a productive split with its existence neither threatening Bitcoin’s nor requiring support from Bitcoin’s remaining adherents. Now Bitcoin is free to provide it’s small block vision and cash the large block. My hope is that this will reduce fighting in the long run as both sides realize that the other isn’t going away. Just like we did with Ethereum and Ethereum classic.”
Perhaps democracy is the biggest winner and a byproduct of cryptocurrencies, and that is the silver lining.
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Author: Shivdeep Dhaliwal