It’s all quiet on the crypt front, for now. The Bitcoin Gold tantrum has passed as it dawns on market participants that, although a fork has taken place the new currency will not be launched until the code base is stable and secure. Bitcoin has rallied from a low of $5,200 early this week to briefly reclaim $6,000 but has slipped back since to hover around the $5,800 mark.
There’s seemingly nothing to stop a further advance until the next fork takes place in mid-November or it could be that buyers hold back until after the fork.
Although we reported here a couple of weeks ago that the SegWit2x fork would take the BTC ticker that bitcoin trades under, it now appears that a new coin will be created with the ticker of B2X. It will become the third variant of bitcoin, behind Bitcoin Cash and Bitcoin Gold.
Ahead of the fork, a futures market for SegWit2x is already being quoted on Coinmarketcap.com, showing a price of $992 at the time of writing.
Nejc Kodrič, the chief executive of the Bitstamp exchange, highlighted the confusion the hard forks are creating in the marketplace. “Hard forks are a challenge for everyone in the cryptocurrency field. They cause a lot of confusion and uncertainty for consumers, making some people hesitant to get into the field,” he said in a statement.
Bitcoin Gold, which forked on 24 October, is now not being launched for another week or two, according to Jack Liao, the main mover behind the fork, who spoke to Interactive Investor earlier this week.
Kodrič also noted that it’s not all bad news with hard forks, adding: “At the same time, there are upsides to the forks, as they’re happening because of innovation and efforts to make the transaction process potentially faster.”
David Mondrus, founder and chief executive of Trive.news, takes a similar view, seeing the forks as underlining the robustness of the software and the network. “BTC’s strength is that it is open source. That means anyone can fork any time. As long as there’s demand, there will be forks. When the market realises a fork doesn’t have significant value differential, then the market will stop accepting it,” he said.
Trive is a blockchain project aimed at combating fake news by using cryptocurrency and incentivised crowdsourced research to expose incorrect and misleading content. Its initial coin offering begins on 16 November.
Jörg Platzer, a crypto economist based in Germany and a board member of the TontineTrust.com blockchain project seeking to disrupt the pension funds industry, sees corporate motives behind the forking: “What we are really looking at are attempts by groups of corporations to get Bitcoin under centralised control, while users and developers are trying to keep up or strengthen the decentralisation.”
He also forecasts increased volatility ahead. “The price will probably go a bit wild around and shortly after the next fork. Even delays on the Bitcoin network are to be expected due to fluctuation of the hashing power (miners jumping back and forth between the chains in order to always mine the more profitable coin).”
And the price could just as easily appreciate in the run-up to the SegWit2x fork, with buyers attracted in the hope of receiving ‘free’ money. Denis Suslov, chief financial officer at the Finom.io blockchain platform, explains: “Bitcoin forks fuel speculation. Users effectively double their balances in cases where the fork is supported by a majority of miners. A spin-off cryptocurrency is bound to have value, hence in the days ahead of the fork people are willing to pay extra for their bitcoins.”
Finom is a Swiss company with core offerings consisting of a mining farm, cryptocurrency exchange, trading app, and brokerage.
By way of a refresher, the SegWit2x upgrade aims to increase the number of transactions bitcoin can handle. There has already been an upgrade – SegWit – that was a ‘soft fork’ rolled out to all bitcoin client nodes (computers on the network) on 1 August and which raised the limit on block size and is backwards compatible.
The SegWit2x ‘hard fork’ upcoming in November, at block number 494,784, doubles the block size to 2MB and when combined with the soft fork changes creates an effective maximum block size of 8MB.
The soft fork on 1 August lowered transactions fees from an average of around 200 satoshis per byte to 100 satoshis today, according to satoshi.info which tracks transaction fees. One satoshi currently equals ฿0.0000590855. There are 100 million satoshi (0.00000001) to one bitcoin.
However, if the SegWit2x fork is not going to be the main chain, i.e. keeping the BTC ticker, then it means the new software won’t need to be taken up by all client nodes (miners). The Digital Currency Group is behind the so-called New York Agreement that pulled together major industry players to support the SegWit2x solution in a compromise between miners and some on the core developer team, and is the owner of news site CoinDesk and the GDAX crypto exchange.
When GDAX made it known in a blog this week that it that was interpreted as meaning it would be creating a new ticker for SegWit2x fork (B2x), this was taken as an indication that the SegWit2x supporters would not be seeking to keep the BTC ticker that bitcoin trades under. It followed that up with a blog post the next day (https://blog.gdax.com/clarification-on-the-upcoming-segwit2x-fork-c30df26b2744 ) stating that: “We are going to call the chain with the most accumulated difficulty Bitcoin.” In other words, the chain that attracts the most miners gets the ticker BTC, which will likely be an approach taken by other exchanges, but who knows? More confusion to reign.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.