The recent deep in the Bitcoin price is caused by a combination of different factors:
- Scalability, network performance decrease
- Uncertainty, risk of a hard fork on August 1st
- Market correction
- Moby Dick attacks the network
While other Altcoins don't have the same problems of Bitcoin, they're still following the sentiment of the market. It's important to understand what's happening to Bitcoin in order to understand why the entire market is deeping.
Scalability, network performance decrease
The number of people adopting Bitcoin and the number of transactions increase is causing a decrease in the performance of the network, so transaction that once took 10 seconds average, now can take up to hours. When Bitcoin was created, Satoshi Nakamoto, set a block limit of 1Mb. A proposed solution, called Segwit2x, consists in increasing the size to 2Mb.
Bitcoin was designed to be immutable, in order to implement this solution, 90% of the node in the blockchain needs to signal (read approve) the use of 2Mb blocks. On August 1st, assuming we reach that number, Bitcoin blockchain will update to Segwit2x.
Uncertainty, risk of a hard fork on August 1st
The risk is that we don't reach the quorum for Segwit2x, in that case, Bitcoin will fork into 2 Bitcoin version, one called Bitcoin148 (or simply Bitcoin) and the other one Bitcoin Classic. We already saw a hard-fork in Ethereum, and while the price probably appreciated, breaking the main rule of the immutability of blockchain, definitely affected the long term reliability and trust in Ethereum.
As many pointed out, Segwit2x will be a temporary solution to the network traffic, so we can expect this problem to show up again in the next few years.
Market Correction
Bitcoin and other Altcoins this year have seen an incredible increase in price, Ethereum from just $10 to $400, Bitcoin from $1000 to $3000, Litecoin from $4 to $50. Reaching a new all time high is a good reason to have a price correction especially with investors taking their profit gains. When this correction happens in a combination of the above scalability issues and uncertainty, the price can crash quite hard. Also let's not forget that volatility in crypto is always being very high and that's because of a "relatively" low volume, because of whales manipulating the market, news and other factors.
The point here is, a correction was necessary and healthy. I'm personally expecting lower low, the week before and after August 1st will be a very interesting entry point for new investors. My speculation is that, either we have a hard fork or not, the price will most likely appreciate from August 1st to the end of the year, possibly reaching again the ATH, possibly reaching a new one.
Moby Dick attacks the network
We recently discovered that the Bitcoin network was under a coordinated flooding attack that decreased the network performance and increased the transactions fees. The whale behind this attack stop just a few days ago, giving us a glimpse of the path of Moby Dick, you can read more about the attack here:
https://twitter.com/i/moments/885827802775396352
Many are guessing the reason of this attack and why it stops, and if it will start again. Here's a tweet from Charlie Lee, our favorite Cryptocurrency developer, who noticed that the Bitcoin mempool was all of the sudden free:
https://twitter.com/SatoshiLite/status/884011944708931588
- SatoshiLite
Timeline
Here's the timeline for the activation of Segwit and other Bitcoin new features:
We'll all be looking very closely to see how the situation evolve, meanwhile a few suggestions. If you own Bitcoin, move them into a paper wallet. In case of a hardfork, you'll now own both BTC classic and BTC 148. Possibly the price will split and will grow from there like it happend to Ethereum and Ethereum classic.
Have some USD ready to buy at the next price deep, and always HODL!!
This post is part of the Writer challenge: 30 articles in 30 days.
Federico Ulfo
https://twitter.com/feulf
https://linkedin.com/in/federicoulfo