Hong Kong - Bitcoin slumped as the
cancellation of a technology upgrade prompted some users to switch out
of the cryptocurrency, spooking speculators who had profited from a more
than 500% surge this year.
The cryptocurrency has dropped 5.6% since late Friday, and at
one point extended its
slide from last week’s record to as much as 29%. Bitcoin cash, a
rival that split from the original bitcoin in August, has jumped 32% since Friday, according to data compiled by Coinmarketcap.com.
Bitcoin cash is gaining popularity because of its larger block size, a
characteristic that makes transactions cheaper and faster than the
original. When a faction of the cryptocurrency community canceled plans
to increase bitcoin’s block size on Wednesday - a move that would have
created another offshoot - some supporters of bigger blocks rallied
around bitcoin cash.
The resulting volatility has been extreme even by bitcoin’s wild
standards and comes amid growing interest in cryptocurrencies among
regulators, banks and fund managers. While skeptics have called
bitcoin’s rapid advance a bubble, it has become too big for many on
Wall Street to ignore. Even after shrinking by as much as $38bn
since Wednesday, bitcoin boasts a market value of $105bn.
Supporters of bitcoin’s technology upgrade “are now switching support
to bitcoin cash,” said Mike Kayamori, head of Tokyo-based Quoine, the
world’s second most-active bitcoin exchange over the past day. “There’s a
panic about what’s happening. People shouldn’t panic. Just hold on to
both coins until we see how it plays out.”
Bitcoin’s slump dragged down shares of cryptocurrency-related
companies, including Hong Kong-based
PC Partner, maker of graphics cards that can be used in the
mining of digital coins. But there were few signs of wider ripple
effects. Asian stocks were mixed as investors awaited continuing talks
on tax legislation in the US this week.
The cancellation of last week’s bitcoin upgrade has left users to
choose between the two versions of the cryptocurrency. On one side is
the original bitcoin, powered by so-called SegWit technology, which aims
to improve its performance by moving unessential data off of its
underlying blockchain. On the other side is bitcoin cash, which
allows its blockchain to handle eight times as much data as the
Proponents of bitcoin cash believe their approach is simpler and
closer to the original goal of bitcoin, which was described primarily as
a payment system in its white paper. Supporters of the original bitcoin
say that vision is too limited, and that by improving the blockchain
with SegWit technology, bitcoin can become a new digital asset class
that not only supports payments but countless other functions.
While bitcoin cash has been around for months, it saw limited support
as the community awaited last week’s technology upgrade for the
original bitcoin, which promised similar features. Now that the upgrade
has been called off, businesses that use the cryptocurrency primarily as
a payment method are expected to increase adoption of bitcoin cash.
While bitcoin cash surged over the weekend, it hasn’t been a straight
line up. The cryptocurrency was trading at $1 246 at 08:54, down from a high of about $2 478 on Sunday, Coinmarketcap.com
Bitcoin has been similarly volatile; it initially rose after news that it would avoid another split, but the gains were
short-lived. It’s now trading at $6 242 after touching a record $7 882 on Wednesday.
Volume across bitcoin exchanges jumped to 436 021 bitcoins on Sunday,
the highest since September, Bitcoinity.org data show. BitMEX, an
exchange for cryptocurrency derivatives that allows shorting, saw record
activity on Sunday, CEO
Arthur Hayes said.
“Crypto trading is not for the novice investor,” said
John Spallanzani, chief macro strategist at GFI Securities LLC in New
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