The price of Bitcoin plummeted over the weekend, falling below $1,900 for the first time in nearly 50 days.
The cryptocurrency has been experiencing a downturn for much of June and July. The price has reportedly been affected by the upcoming conclusion to the “civil war” within the community.
On 1 August Bitcoin improvement proposal 148 (BIP148) is scheduled to activate. As the Bitcoin blockchain is run by consensus, users are compelled to commit to the activation of one scheme or another.
Battle of the Bitcoins
The scaling debate has been a major driver of peaks and troughs for Bitcoin. Major mining firm Bitmain announced the launch of its user-activated hard fork (USAF) in June. A month earlier, major industry figures agreed on the enabling of the Segregated Witness (SegWit) scheme.
SegWit is supposed to be a soft fork, a temporary solution to make Bitcoin’s protocol handle the growing transactions burden. If a majority of hash power signals support for Segregated Witness through BIP148 on or before August 1st, the protocol upgrade will activate smoothly.
It’s equally possible that a majority of hash power will not go along with BIP and the UASF, in which case the Bitcoin blockchain would split into two. Holders of private keys would have a 148 BTC and a Legacy BTC wallet.
Good news, bad news
In a major worst-case scenario, according to Bitcoin Magazine, a “cyber-battle” could break out between two camps in the debate. Escalation of that battle could see Bitcoin’s exchange rate drop “as low as zero”.
The good news for traders that each Bitcoin will effectively be copied to both chains in the event of a split. The bad news is that the coin-split would be messy and risky.
“The scaling debate has been around for two years now and the ramifications of the present state of play lead to a number of price-sensitive scenarios that are not positive,” Charles Hayter, co-founder and CEO of cryptocurrency data platform CryptoCompare, told Moneycontrol. In the event of a hard fork two Bitcoin ledgers will be created on August 3rd, transactions made during that period are at risk of being lost.
Add a few zeros
When polled by CoinDesk, responding analysts largely credited the price decline to short-term concern about the market, which has undergone a period of rapid appreciation since the beginning of 2017.
The total value of all publicly traded cryptocurrencies fell by more than $10 billion on Sunday amid wide-spread sell-offs. In 30 days the market has fallen by 46.9% in value. Ethereum, intrinsically linked to Bitcoin, also experienced a crash, losing 20% of its value.
Andreas Antonopoulos, author of “Mastering Bitcoin” and a teaching fellow at the University of Nicosia, blamed the rapid rise in value of cryptocurrencies for the crash. In a tweet he explained that the scaling debate is “just a trigger”.