Bitcoin Cash (BCH) reached lofty levels above $2,500 over the past weekend. The move was quick, sharp and surprising leaving many traders wondering what happened. The short and easy answer is that the Bitcoin development community decided to cancel the Segwit2X hard fork that had been scheduled for later this week. The more complicated answer is how that cancellation has affected the market.
To briefly recap Segwit, or segregated witness, it is a protocol change for Bitcoin that was expected to help increase the block size of the blockchain. That was important because it would speed up the rate of Bitcoin transactions, help increase the networks efficiency and make it better suited for day-to-day financial transactions as it was originally intended to do. The protocol change was broken down into 2 different hard forks, the first of which created Bitcoin Cash.
Bitcoin Cash did not at first receive the credit it was due. While a large portion of the mining and investing community viewed it as a superior version of Bitcoin there was still the Segwit2X hard to contend with. This hard fork was meant to continue on with upgrades begun with 1X and correct many of the issues facing Bitcoin today. The apparent inevitability of the fork and the probability of newly created Bitcoin2X tokens helped to drive the price of Bitcoin to new all time highs near $7,500. It also kept other altcoins including Bitcoin Cash, Ethereum and Litecoin trending sideways.
The cancellation of Segwit2X came about because of a widespread lack of interest from the mining community. Developers decided it wasn’t worth a hard fork if it would further fracture the community. Once announced a number of things happened. First, traders hoping to gain from the 2X fork had no more reason to be in Bitcoin while other tokens were lagging the market. They instantly began taking profits and moving those profits into other coins including BCH, ETH and LTC.
Second, traders, investors and miners who had hoped to be part of a better version of Bitcoin found themselves on the wrong path. They also sold out of BTC in favor of BCH and/or switched their rigs from BTC to BCH because BCH has turned out to be the better choice (for those looking for a faster a Bitcoin network). Li Ang, head of China based mining pool Canoe Pool, was sent out a statement in the wake of the cancellation with this title “Bitcion Cash Is Bitcoin Now”.
The question, what will happen now? is being asked across the investment and trading community. Some see the end of Bitcoin although that is far from likely. What is possible however is what some have labeled the “flippening”, the possibility BCH will gain the upper hand and trade at a premium to Bitcoin. This is because Bitcoin sans 2X will remain a better store of value than an exchange while BCH has already handled the block size issue, is faster and more readily usable for generalized transactions.
What traders need to remember is that the wild moves in both BCH and BTC that occurred over the weekend are only the first in what is likely to be a long and drawn out battle for dominance. These moves are driven by news, include a large amount of speculative interest and are likely to result in equally large snap-backs until volatility within the market dies down.
A look to the BCH/USD chart is a prime example of what I mean. BCH hit extreme highs near $2,800 but has settled back to a more “reasonable” price near $1,200. No doubt early holders of BCH found 1000% gains too attractive to pass up. The flippening may happen but I don't think it will be too soon, there is quite a bit of technical resistance for BCH to overcome.Trade here
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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