The previously discussed fears of an imminent “forking” in Bitcoin have led to the biggest drop in Bitcoin between Thursday and Saturday, as investors sold the digital currency on worries about its future, although it managed to regain some footing on Monday, rebounding back over $1,000. After soaring to an all-time high of $1,350 as recently as March 10 on speculation that regulators could approve the first U.S. bitcoin exchange traded fund the following day (the SEC denied the application but the negative impact was transitory), the digital currency then slipped back.
The drop accelerated on Thursday and BTC hit a five-week low of $944.36 on Saturday. But bitcoin recovered a little on Sunday and built on those gains on Monday, climbing around 2.5 percent to roughly $1,050.
As discussed over the weekend, the selloff was driven by a longstanding, and intensifying, row over whether – and how – to increase the capacity of the “blocks” that bitcoin transactions are processed in, so as to make sure there are no delays in transactions being finalised, which as of Sunday took as long as 4 months and the delay is growing ever faster, making a solution – even if unpalatable – inevitable.
“The bitcoin scaling debate is a risk for the network and highlights core issues in terms of governance and this is where more nimble crypto competitors see advantages in fleshing out their capabilities sooner,” said Charles Hayter, CEO of digital currency analysis website Crytocompare, cited by Reuters.
However, as Bitcoin’s sun may be setting – if only for the time being – it is rapidly rising for some of its most key “cryptocurrency” competitors, chief among them: ether. The digital currency behind Ethereum – a project that some experts say holds more potential than bitcoin and which recently was supported by a consortium of corporations including JPM and IBM – tripled in value this month, jumping to record highs in the mid-$50 before retracing some of the dramatic gains and stabilizing in the $40 range.
And while conventional capital markets may be experiencing a “great rotation” out of retail cash into ETFs as Reuters puts it, a similar dynamic was taking place in the cryptocoin realm: “some experts said traders were selling bitcoin and buying ether, which was exacerbating the falls in the original cryptocurrency.”
As Reuters reported, “traders in the space are looking for better returns in the more risky and nascent cryptos such as Dash, Monero and Ethereum (and are) looking to replicate the extraordinary returns that bitcoin saw in its early days,” added Hayter.
Meanwhile, with the recent Chinese crackdown on bitcoin seemingly eliminating the possibility of using the cyrptocurrency to bypass China’s capital controls, sending Chinese trading volumes to nominal levels, thereby removing one of the most rabid buyers of the legacy cryptocoin, the biggest losers may be the Winklevoss twins: the SEC dashed Cameron and Tyler Winklevoss’s bitcoin ambitions earlier in the month by rejecting their application to list an exchange-traded fund linked to the digital currency.
It remains to be seen if Ethereum and its altcoin peers can replicate the bitcoin move from 2013, when bitcoin went from double digits to over $1000 in the span of weeks.