The bitcoin price experienced a nearly $1,000 flash crash after reaching a new all-time high just below $7,900 in the wake of the cancellation of SegWit2x.
As CCN.com reported, Mike Belshe, chief executive of bitcoin wallet service BitGo and project lead for SegWit2x, announced today that the controversial Bitcoin protocol upgrade had been suspended indefinitely due to a lack of consensus and the near-certainty of a blockchain split following its activation.
The bitcoin price surged in response to the announcement, rising to a new all-time high of $7,899 at 17:30 UTC on bitcoin exchange Bitfinex. However, soon after, the bitcoin price fell into decline, and at approximately 18:40 UTC it fell prey to a flash crash and plummeted to $6,977. This plunge constituted a $922 — or 12% — decline from the all-time high it had set just an hour prior.
Bitcoin’s rapid price swing indicates a potential conflict between the short- and long-term impacts of SegWit2x cancellation. The hard fork would have split Bitcoin into two competing blockchains, and the fight for supremacy would have been ugly. Bitcoin services expected to undergo serious disruptions, and there was a high probability that some users would lose funds due to replay attacks and other exploits.
That Bitcoin avoided fracturing in this manner is bullish for its long-term prospects and will encourage so-called “hodlers” — investors with extended investment horizons — to increase their positions.
However, some analysts had speculated that the impending activation of SegWit2x was actually propping up the bitcoin price in the short-term and contributing to its growing market share. The reason for this is that a blockchain split would have effectively resulted in the creation of a new cryptocurrency, providing current bitcoin holders with “free” coins on the second blockchain. Because SegWit2x activation appeared certain, traders may have already priced in the value of these “crypto dividends” and increased their bitcoin positions accordingly. Now that the hard fork has been suspended, they may transfer some of that capital back into the altcoin markets.
The bitcoin price’s spike to $7,899, subsequent crash to $6,977, and eventual recovery to a present value of $7,176 bear witness to this conflict between traders — who prioritize short-term profits — and investors, who are primarily concerned with long-term growth. Expect volatility as the market continues to sort out the impact of SegWit2x cancellation.