Weekly Roundup: Bitcoin Reaches Historic Highs, Bitcoin Cash Hanging In There
We recap the effect of BIP 91 on the price of bitcoin (it’s largely positive), how Bitcoin Cash is faring, and discuss the possibility of cryptocurrency being in the middle of a giant bubble.
$3,000 Finally Broken… By a Lot
The price of BTC reached fresh new highs this week, crossing the much-anticipated $3,000 mark for the first time on August 4th, reaching an all-time high of $3,370 during the writing of this article. This equals a 20% gain in a mere 7 days, proving that investors are decidedly happy with the results of the bitcoin soft fork, BIP 91, that occurred on August 1st. The successful activation of SegWit via BIP 91 has re-secured confidence in continued success of bitcoin, despite a renegade hard fork (BCH) threatening to steal (or at least ride on the back of) bitcoin’s thunder and glory.
How to Get Your Bitcoin Cash
In the case that you are a holder of your bitcoin’s private keys, there are a handful of BCH wallets which allow you to import your private keys and be credited with Bitcoin Cash at a ratio of 1:1. The BCH can then be sold at a number of major and minor exchanges that have decided to support it. Bitcoin guru Roger Ver, who claims to be the owner of over 130,00 bitcoins, is throwing his support and weight in the community behind Bitcoin Cash, apparently unintimidated by conjectures that the “new bitcoin” may simply be yet another “pump and dump” scheme that has already happened hundreds of times over the course of cryptocurrency’s brief history.
Rather remarkably, the price of Bitcoin Cash soared alongside the price of bitcoin for its first few days, defying analyst predictions that the two coins would be in immediate competition with each other. With prices skyrocketing “moonwards” – a heart-racing phenomenon rarely experienced outside the world of crypto – BCH drew the attention of major financial publications and was heralded as a potential new rival to bitcoin. However, the price of BCH has since retreated to well-below 50% of its all-time highs, and with few apparent catalysts to propel the coin’s future adoption and success, its downward trend in price will likely continue – at least until BCH can prove its credibility or utility to society.
The Future of Bitcoin Cash
This latest incarnation of a bitcoin fork is far from over, however. The fact that BCH futures were trading above $400 before the fork and the price of BCH itself managed to climb to over $750 just a day after the fork is a testament to the fact that this particular vision of bitcoin has power and a movement of individuals behind it. Prices have already rebounded some 25% as of the writing of this article. It is true that bitcoin is facing a scaling issue which could theoretically result in the evaporation of its competitiveness of a financial technology.
Miners are incentivized to include transactions with the biggest fees into their blocks, and as an ever-increasing number of users are conducting transactions on a daily basis, there is an ever-increasing amount of transactions awaiting confirmation by miners for inclusion into the blockchain. Therefore, only the transactions with the biggest fees will be added into miner blocks, not only making it more expensive to use bitcoin, but also slowing down average confirmation times and jamming up the network with stuck transactions. The fastest solution to this problem: increase the limit of the block size (which BCH does, quite dramatically), so that more transactions can be added to every ten-minute block. Although Bitcoin Cash may not go on to enjoy the same success as bitcoin in the long run, it represents acknowledgement of the problem and attempts to provide a solution.
Also in the News
In response to legal threats from a contingency of their users, Coinbase announced that they will begin to credit BTC-holding customers with BCH starting in January 2018. While the move is meant to soothe customers who felt cheated by Coinbase’s original decision to not credit wallet users with Bitcoin Cash altogether, it may still stir frustration if the price of BCH continues its current march downward.
Comparisons of cryptocurrency market capitalization charts to other financial market charts with arguably similar features is fueling speculation that the blockchain space may be undergoing some sort of a “crypto bubble.” The makings of a bubble are an ingrained part of mass human psychology, a fate that cannot be foreseen but only realized after the fact, regardless of how many famous instances there are of financial bubbles throughout the ages.
Though the blockchain has demonstrated true problem-solving potential, irrationally-driven investors can become over-excited by the prospects of a new marketable phenomenon, pushing prices to artificially high and unwarranted levels. It’s impossible to tell where in the bubble cycle cryptocurrency currently stands, but it is worth being reminded that mega-corporations Google and Amazon went through their own bubble phases as well.