It was a weekend of drama for bitcoin prices.
First, its price crashed from a record high of $7,800 last week due to a sell-off, as traders shifted funds to Bitcoin Cash, the currency that was created after a fork in bitcoin’s blockchain in August. (See also: Bitcoin Price Hits Record High After November Fork Is Called Off.) Then, the inflow helped Bitcoin Cash prices skyrocket to $2,500, a jump of 300 percent from price levels of $800 less than two days earlier.
Come Monday morning, however, bitcoin’s price had recovered and Bitcoin Cash was on a downward slide. As of 16:00 UTC, bitcoin was trading at $6,662.66, up 13.82% in the last 24 hours. In the meanwhile, Bitcoin Cash was trading at $1,225.62, down 18.62% from its price levels 24 hours ago.
Other cryptocurrencies in the top 10 mostly held steady over the weekend, registering price increases and declines of less than 5%. At 16:05 UTC, the overall cryptocurrency market capitalization was $203.2 billion, down from a high of $212.1 billion at 07:47 UTC Sunday.
What Caused The Wild Swings?
As has mostly been the case with bitcoin’s price in recent months, the jury is still out on the causes for Bitcoin Cash’s surge. However, most accounts seem to point to the bitcoin developer community's decision to call off a fork in bitcoin’s blockchain that was set to increase the original coin’s block size by 1 MB to 2 MB. The contentious fork would have increased block size and would have speeded up transaction numbers and velocity through the bitcoin network. (See also: The November Fork Is Huge But Not Universally Welcomed.)
However, several developers from bitcoin’s core community argued against the fork, citing lack of the transaction replay feature (which could potentially lead to double accounting) and claiming that it diluted founder Satoshi Nakamoto’s vision of a decentralized network. Simultaneously, Bitcoin Cash underwent a fork of its own that made its network profitable to miners.
Jacob Eliosoff, manager of Trevi Digital Assets, stated that backers of SegWit2x, as the hard fork was popularly known, had “nowhere to turn to but BCH” after the fork was called off. The same Forbes post quotes avid Bitcoin Cash supporter Roger Ver – otherwise known as "Bitcoin Jesus" for his proselytising of the cryptocurrency – as saying he was selling his bitcoin for Bitcoin Cash.
Some have also said that Bitcoin Cash’s weekend price spike was fueled by speculators in Korea. Jihan Wu, CEO of the world’s largest bitcoin equipment maker Bitmain, said Bitcoin Cash had more potential as compared to the original coin. His statement is significant, when you consider that the Bitcoin Cash network surpassed bitcoin’s blockchain in mining power at 4:30 UTC on Sunday. (See also: How Does Bitcoin Mining Work?)
Is Bitcoin Back In the Game?
As of this writing, bitcoin is back on its upward trajectory. Online publication CoinDesk writes that bitcoin is “likely to trade sideways in the short-run, before resuming the sell-off and eventually finding a floor around $5,000 levels.” Given the opaque nature of transactions around the currency, it would be advisable, however, to take those predictions with a pinch of salt.
Alex Sunnarborg, co-founder of crypto hedge fund Tetras Capital, lists a number of difficulties in predicting bitcoin’s future price. These range from mining interest and profitability (for miners) to political environment surrounding the currency to global regulatory announcements and the rise of alternative cryptocurrencies.