What Triggered Bitcoin Cash's Wild Weekend Ride? Is It Over Yet?
Investing.com | Nov 15, 2017 18:42
by Tanzeel Akhtar
It was an action-packed weekend for crypto traders. As Bitcoin fell below $5,500, traders suddenly shifted to Bitcoin’s offshoot, Bitcoin Cash (BCH).
The third most popular cryptocurrency after Bitcoin and Ethereum, Bitcoin Cash was created from a Bitcoin hard fork back in August. This past Sunday, Bitcoin Cash spiked, jumping in trade from around $600 to the $2,790.00 range, boosting its total market cap to around $22 billion, at least for a short while. On Monday BTC crashed back down to $1,120 before moving higher. It's currently trading at $1,305 as of time of writing.
What caused the sudden, unexpected spike? Daniel Masters, Director at Global Advisers Bitcoin Investment Fund accused Korean traders of “market manipulation” via the Bithumb exchange and appealed to his LinkedIn connections to complain to Korea’s financial supervisory authority:
Bithumb servers crashed during the surge; users of the Seoul-based exchange could neither make withdrawals nor deposits after swelling transaction volume caused a server connection failure. Reports indicate that trading volume was about 800% higher than it had been in October.
The main driver for the initial Bitcoin slide was the news that an anticipated software upgrade known as “SegWit2x" would be suspended. Though some considered the planned hard fork to be an upgraded, key developers ultimately didn't support the move.
When news of the cancellation broke, the Bitcoin slide began. Some speculate that the consolidation was sparked by investors fleeing Bticoin when they realized there was no longer a hard fork that would "'airdrop' free dividend coins "
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It hit a low of $5,426.00 on Sunday, its lowest since October 25 down almost 32% from its record high of $7,888 hit on the previous Wednesday.
Of course, Bitcoin is known for trading volatility and it has a tendency to rebound quickly from pullbacks. Now however, it looks like Bitcoin Cash is competing with its 'parent' currency in the volatility stakes.
Trace Schmeltz, a partner in the Chicago and Washington, D.C. offices of Barnes & Thornburg LLP, a cryptocurrency observer, points out that it's not surprising that Bitcoin Cash is appreciating rapidly in value:
“For cryptocurrency to achieve its full potential, it has to be transactional. Most investors were waiting to see if Bitcoin itself would gain the flexibility that Bitcoin Cash promises. When Segwit2x was scotched, it became clear that anyone hoping for more functionality, scalable blocks, and potentially quicker transaction verification would have to look to Bitcoin Cash.”
Sergey Grybniak, founder and CEO of opporty.com a service marketplace on Ethereum blockchains believes the fundamental issue at play is that the current Bitcoin architecture is not scalable and will therefore be unable to handle the volume of transactions yet to come with cryptocurrencies. He notes that Bitcoin Cash answers that need:
“Bitcoin Cash, on the contrary, is more scalable due to its block size of 8 MB vs 1 MB. For this reason, I believe the rise of Bitcoin Cash will continue and it is even likely to surpass Bitcoin as the cryptocurrency of reference.”
Jeffrey Van de Leemput a Bticoin investor who is also co-founder of BTC-Finance and a sales representative at Sendcloud, a company based in the Netherlands, explains there is more than what meets the eye when it comes to Bitcoin Cash. He's convinced investors will be in for a continued wild ride.
“Right now there is a war going on between the supporters of Bitcoin and the supporters of Bitcoin Cash. Rather than supporting the development of both coins, people are fighting to make sure their coin of choice becomes ''Bitcoin''. For example, Roger Ver has acquired the domain ''bitcoin.com'' and on this domain promotes Bitcoin Cash as the real Bitcoin.”
According to Leemput the reason many people support Bitcoin over Bitcoin Cash has a little to do with the technology:
“There are a select few [who] have managed to acquire a lot of Bitcoin Cash by both mining superiority over the period following the inception of Bitcoin Cash, and by buying a vast amount of Bitcoin Cash. This can be seen by looking at the block explorer of Bitcoin Cash. In the first few weeks, 90% of the blocks were mined by three entities. This in effect has caused a small group of people to own a significant amount of both bitcoin cash as coins, as well as the mining power maintaining the network.”
Graeme Moore, an executive at Polymath, a securities token platform, thinks Bitcoin Cash is in a massive upward trend at the moment, which looks to be primarily related to the failed Segwit2x fork originally scheduled for this month. He concludes:
"Money is flowing out of BTC and into BCH. Currently, there are lengthy delays for Bitcoin transactions, fees for BTC transactions are rising rapidly, and BCH is posing as a viable alternative.”
It would appear the battle between the Bitcoin cryptos rages on, as both BTC and BCH find their places, and their fans, within the cryptosphere. One thing is certain however, volatility will likely continue. Caution—as with any other investment vehicle—remains an investor's best defense.
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