In the first week of August, CNBC’s Brian Kelly outlined three factors for the recent surge in bitcoin price: completion of the August 1 Bitcoin Cash (BCH) hard fork, elimination of uncertainty surrounding scaling and rapid increase in demand from institutional investors.
The successful execution of the BCH hard fork established an important precedent for the bitcoin community and network. Unlike the analysis of most analysts including Vinny Lingham, bitcoin price demonstrated a strong rally after the execution of BCH hard fork, mostly because it had minimal impact on the main bitcoin network. Prior to and after the fork, the bitcoin network operated normally, processing transactions without any sort of security issues.
Elimination of uncertainty of a future hard fork was also a driving factor of bitcoin price because it built confidence around investors and the market. Traders started to express confidence in bitcoin’s ability to scale and as a result, bitcoin price began to surge. During last week’s strong rally, bitcoin price established a new all-time high at $4,510.
However, over the past few days, bitcoin price dipped below the $4,000 mark, dropping by over $500. It has recovered since to $4,060 and various momentum indicators including the moving average convergence divergence (MACD) demonstrate that bitcoin price will likely sustain its current upward momentum throughout the upcoming days.
What Led to Short-Term Decrease in Bitcoin Price?
Earlier this week, BitPay, arguably the largest payment processor for merchants, received harsh criticism from the bitcoin community for misleading users and merchants with its SegWit2x hard fork. The Merkle previously reported that some businesses and miners are preparing for the SegWit2x hard fork.
Nicolas Dorier of NBitcoin went as far as to provide a BitPay API without SegWit2x support, or as Dorier explained without “BitPay” to current merchants on the BitPay platform.
“I will provide a Bitpay compatible API for those who want to keep Bitcoin payment deployed for using Bitpay but without the bitpay part,” said Dorier.
Led by Jean-Pierre Rupp and former Bitcoin Core developers including Jeff Garzik, the consortium of 58 businesses and mining pools established by Digital Currency Group is planning a hard fork in November, to create a separate SegWit2x chain to bitcoin. If the proposal is accepted and the consortium decides to fork bitcoin, it will lead to another chain split, leading to the existence of two bitcoin-originated cryptocurrencies: BCH and the SegWit2x coin.
The announcement of Rupp read:
“During the month of November 2017, approximately 90 days after the activation of Segregated Witnesses in the Bitcoin blockchain, a block between 1 MB and 2 MB in size will be generated by Bitcoin miners in a move to increase network capacity. At this point it is expected that more than 90 percent of the computational capacity that secures the Bitcoin network will carry on mining on top of this large block.”
Although Garzik emphasized that SegWit2x will be bitcoin and the majority-supported chain, many experts like Blockstream executive Samson Mow explained that most miners and businesses within the SegWit2x consortium have dropped their support toward the hard fork.
— Samson Mow (@Excellion) August 19, 2017
In November, around the time of the activation of SegWit2x hard fork–if it in fact occurs–the price of bitcoin will likely suffer a minor correction, as it did prior to the BCH hard fork. Currently, bitcoin is recovering from the initial announcement of the SegWit2x team and the market is rebuilding confidence.