by Eloisa Marchesoni

We are all used to significant price fluctuations of Bitcoin, the most famous of the cryptocurrencies and the first example of digital currency, but the latest downturns have led to a result that is likely to cause exceptional concern among investors.

In fact, the overall market capitalization of Bitcoin has fallen below USD 100 billion, back to levels of over a year ago. This time, though, the cause is not to be sought in important speculative maneuvers, in the violation of a wallet or in the collapse of an exchange platform, yet it is to be linked to at least three events that occurred in the last days.

Firstly, this decrease in price is partly due to an update run on an application that regulates the trend of the Bitcoin Cash currency, which – if you remember – spun out of Bitcoin in August 2017. Bitcoin Cash had drawn various Bitcoin supporters who felt disturbed by Bitcoin Core’s belief that the base layer cannot and should not scale. Coherently with the aim of accelerating the scalability process of the Bitcoin Cash network, this update, just like the others that preceded, was intended to allow a greater number of transactions and increase operations based on Bitcoin. All this should have been done with the approval of the whole community, even if it is said that such support is now destined to be almost lost because of the negative effects observed on Bitcoin capitalization. Technically, the update would have had as objective the realization of a fork, that is the creation of a new cryptocurrency, a derivative from Bitcoin Cash itself.

This time, rather than being a routine upgrade, as the fork in May 2018 was, this it has led to two opposing factions among the developers, who just cannot agree on the technical direction of the Bitcoin Cash after the fork: on the one hand Bitcoin ABC, which is in turn an implementation of the Bitcoin Cash fork and is supported by the Bitmain miner, on the other BSV, supported by its promoter Craig Wright. Of course, community support has been split as well between the two camps, thus making the whole market shift to a negative reaction to this November 2018 fork. Contrary to what might be thought, what happened did not translate into an investor flight to altcoins, which in fact also lost much of their value.

Secondly, Coinbase, one of the most important exchange platforms, declared moments before the event that it would have monitored the fork hard process and that it would have worked to minimize customer disruption until the network met the security standards of Coinbase. The decision of Coinbase to pause all Bitcoin Cash transactions came at the heels of OKEx’s decision to release all Bitcoin Cash future contracts early. Each decision, taken by itself, was no threat to the market, but, given the timing at which they were communicated to the public, they may have added to the massive sell-off that is currently underway, which had at the time already brought over USD 20 billion out of the cryptocurrency space.

Lastly, the dump in market capitalization was also most likely due to the multi-millionaire sale of cryptocurrency by some of the so-called “big whales”, i.e., large players such as hedge funds and investment funds. Their possible intention could have simply been that of increasing profits, in order to assure a profitable year-end close for themselves. In addition to that, the alleged creator of Bitcoin, still known under the pseudonym of “Satoshi Nakamoto”, was reportedly said to be about to liquidate most of the Bitcoin in his possession.

A rise in price could be expected for the last weeks of this year or for the first quarter of 2019, so there is room for hope! Faith in the efficiency of the market should not be lost so easily.

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