In this edition, we mention what by now is obvious on a weekly basis: the price of bitcoin has once again broken previous highs. We also thoroughly explain to you why most (if not all) BTC forks are doomed to fail, and offer you a bit of personal advice on why you should be cautious before considering investing in any bitcoin “clonecoin.”
Guess What? Yep. You Guessed It.
The price of bitcoin set another all-time high today, breaking the $6,300 barrier on Bitfinex, if only for a few sweet, brief moments. As we reported last week, BTC continues to be buoyed by prospects that it will soon be tradeable as an ETF by Wall Street, which will act as a direct conduit to the megabucks that the financial sector has slowly hoarded at the expense of the rest of the world. This puts BTC at an astounding 40% gain in just the last 30 days alone, adding atop the inconceivable gains already experienced in 2017. This price action firmly places the total market capitalization of bitcoin above the long-awaited $100 billion mark, giving it a higher valuation than 90% of the corporations which comprise the exclusive S&P 500 index.
The continued success of the world’s #1 cryptocurrency has also led to some other significant developments not often considered. One of them is the tremendous growth of bitcoin-related jobs in the employment sector. An employment-related website reported an 82% jump in cryptocurrency-based jobs in the 3rd quarter of 2017 alone. Most of these jobs involve the hiring of freelancers capable of managing ICO-related projects, which remains an extremely lucrative area of the industry, despite reports which determined that, statistically speaking, about 90% of all ICOs will fail and their coins will go to a value of zero within a time frame of 1 year after launch. Nevertheless, there are ways to go about being smart with your crypto-investments, and they all start with knowing what you are doing before you decide to do it.
Bitcoin Cash Remains in a Steady Downtrend
Bitcoin Cash (BCH), the result of bitcoin’s contentious implementation of BIP 91 (BIP = “Bitcoin Improvement Protocol,” or suggestion on how to improve bitcoin) which activated on August 1st, originally sold itself as a “User Activated Soft Fork,” or UASF, which sounds much better than “The Failure of Implementation of BIP 148,” or “Bitcoin Core Unapproved Hard Fork.” However, that’s exactly what it was – a hard fork of bitcoin, spearheaded by the self-proclaimed “Bitcoin Jesus,” Roger Ver, and backed by a <10% minority of bitcoin nodes. Unsatisfied with the implementation of SegWit2x and promises of a bitcoin block size increase to 2 MB, Ver wanted block sizes to be 8 MB (or even larger), which would lead to an exponentially larger blockchain as compared to bitcoin’s already-unwieldy 140 GB blockchain.
So, what’s the problem with BCH? There’s a few to choose from, all which contribute to its steady downtrend in price. Let’s go through them, shall we?
#1. It’s a clone coin of bitcoin. Its all-time high of $914 on Aug 19th quickly diminished to $350 within a matter of weeks, meaning only those who truly understood how to separate their BCH from their BTC accounts (like Ver and other BIP 148 supporters) made out like bandits, while everyone else buying in suffered massive losses (and still are). Except for the non-implementation of SegWit2x and the block size increase, it’s the exact same coin as bitcoin. How exact? Let’s compare the logos for the two coins:
#2. Many third-party services refuse to credit BTC holders with their share of BCH. This originally included Coinbase (GDAX), Electrum, Blockchain.info and Bitconnect. A few of these exchanges have since changed their minds, but by then it was too late for many and the price had plummeted to make those holding smaller amounts of bitcoin no longer interested in claiming their BCH. This lack of third-party integration has severely hampered chances of online merchant adoption of BCH, who are for the most part still trying wrap their brains around the concept of bitcoin 1.0. Nevertheless, support for BCH integration exists so it would be incorrect to say this particular clonecoin is “dead in the water.”
#3. A series of “pumps” is the only thing keeping the price of BCH afloat. By now you’re probably aware of what a “pump-and-dump” scheme is, but in case you’re not, its when a master manipulator (or several working in tandem) quickly buy up large amounts of a cryptocurrency in order to make it appear that the price of a coin is on its way to the moon. Hoping to attract “momentum investors” (or “suckers” if one was to be less polite about it), the price of the coin shoots up to levels higher than those paid by the manipulators, who usually were sitting on a huge stash of the coin to begin with, allowing them to sell off their inordinately large stashes at substantial gains. The chart pattern for this type of behavior has been witnessed time and time again: rapid price rises followed by slow sell-offs that ultimately result in losses for the majority of investors, and an identifiable downtrend for the coin at hand.
So Why All the Buzz About Bitcoin Gold, Then?
Honestly, we don’t know. Bitcoin Gold (BTG), as far as we can tell, is simply yet another clonecoin, waiting to join the list of failed BTC imitators like Bitcoin Unlimited, Bitcoin XT and Bitcoin Classic, except unlike the latter two, it already has come to fruition and plans are underway for support from several prominent exchanges. The philosophy behind necessitation for the coin’s existence comes from a very real problem which bitcoin currently faces: it is incredibly difficult to mine a bitcoin block.
On October 25th, when the second part of the “New York Agreement” took effect (the first part being the implementation of SegWit2x), bitcoin was forked again, except this time the new node software launched was designed to be ASIC resistant, meaning that hardware, circuitry and transistors specifically designed for one purpose (the mining of bitcoin, duh) would no longer provide any sort of advantage in the successful mining of a bitcoin block. By doing so, the developers behind BTG also hope to free bitcoin from the chains of companies that make a killing selling ASIC hardware to would-be miners, in a sense making the mining process a more democratic one.
So, what are the chances of Bitcoin Gold’s success in the long run? It sounds like a great idea, right? Bringing democracy back to the crypto-people via leveling the mining playing field? Unfortunately, BTG’s price chart already looks eerily similar to that of BCH’s: opening at a jaw-dropping price before quickly plummeting 75% in the first 5 days of its existence. Sadly, we’re tempted to chalk this new, albeit interesting, clonecoin attempt up to being yet another pump-and-dump scheme, capitalizing on the good name of bitcoin and spearheaded by those who know perhaps have more power and say in the matter than they should.
For now, we’re recommending you stick with the one, true bitcoin (that’s BTC if you’ve become confused by this point), and cash out any fork products you may receive as soon as possible. There’s a tendency for those who hoard wealth for a living to not act in the best interest of their fellow human beings; after all, nobody ever got rich by being charitable – not even Roger Ver.