Summary:
- Bitcoin (BTCUSD) soars 75% in 3 weeks to all-time highs
- Bitcoin block chain undisrupted by a fork
- Break of $3000 level clears the key technical barrier
Bitcoin is on the mouth of nearly anyone on the market these days. With equity indices highs but stuck in tight ranges and prices of many commodities subdued, another giant rally in Bitcoin price is turning investors heads. In this analysis we explain the roots of this move and take a look at the price of Bitcoin.
What is a “hard fork” and why was it feared?
It’s not the first time when the Bitcoin (BTCUSD on xStation platform) price is close to $3000 level – the market arrived there already in the spring. However, fears of a “hard fork” caused a major price decline in July. However, prices have not only recovered but have just pushed for the all-time highs.
Bitcoin has become a very successful but while it enjoyed more and more popularity, a block chain behind it faced capacity issues. Developers were aware that something must be done to the code to make the system more efficient otherwise confirmation times would increase and render the product less and less attractive to users and consequently increasingly exposed to competitions from other solutions. However, there was no agreement on how to implement an upgrade. Remember that block chain is decentralized in its nature and any major changes need to secure a consent from a vast majority of its members (“miners” that provide computing power necessary to confirm transactions). Some of the miners back a code upgrade called Segregated Witness (or SegWit in short) but others want to go further and make more radical changes. Because the consensus was not reached, some of the miners announced they would create an alternative block chain with Bitcoin Cash as a token. This block chain split has been called a “hard fork”. This announcement caused a major price decline in July as it was uncertain how much computing power could move away from Bitcoin and whether it could function in an uninterrupted way.
Traders excited about SegWit
Bitcoin price tumbled below $1900 on July 17 but has started rising since then. First, traders were encouraged by the news that the majority of computing power would stick behind the original Bitcoin and second the news said that every bitcoin owner would be granted with a corresponding amount of Bitcoin Cash. Indeed the hard fork took place on August 1 as announced but while the Bitcoin Cash had a slow start, old bitcoin has functioned smoothly. Not only has this soothed fears about consequences of the split but it also made traders excited about prospects of incoming SegWit. Under SegWit2x some of the data will be moved off the main network while block sizes will be doubled to 2 megabytes, steps that should increase efficiency.
On the chart: price clears $3000 level
BTCUSD surges past the $3000 resistance on waves of an impressive 75% rally. Source: xStation5
Technically a break of $3000 level is a major change. This round number marks another milestone to the cryptocurrency but a move higher also pulls the price out of a relatively long consolidation. Moreover a previous resistance just below $3000 level will act as a support from now on. While the momentum is clearly bullish traders need to be aware that this market could look overbought on many accounts and with intrinsic value for bitcoin nearly impossible to calculate, outlook for its price can change very quickly.