For the first time in three months, Bitcoin initiated its first major move. Unfortunately, for investors in the crypto market, BTC plunged by more than 11 percent, engaging in one of the most intense sell-offs in a 24-hour period in all of 2018.
On CNBC Fast Money, BKCM founder and CEO Brian Kelly stated that the recent drop of BTC and the rest of the crypto market could be mainly attributed to the civil war of Bitcoin Cash (BCH), wherein two camps, one led by Craig Steven Wright, CoinGeek, and Calvin Ayre, and the other led by ABC, Bitmain, ViaBTC, and Jihan Wu, are competing against one another to operate a chain of BCH that secures consensus in the community.
“After some real quiet period, lowest volatility, almost in Bitcoin history, all of a sudden today things exploded, so what happened? Bitcoin Cash, which forked off of Bitcoin last year, is doing a hard fork. Now, when you do a hard fork, everybody usually agrees. But in this particular case, everybody is not agreeing. So we’ve got ourselves a crypto civil war, and that has people in the market concerned,” Kelly said.
The problem with the BCH civil war is that it has started to have an impact on the rest of the market. Calvin Ayre’s camp, called Bitcoin SV, turned it into a hash power competition, threatening to engage a 51 percent attack against the Bitcoin Cash network, which when carried out, gives Ayre and his camp the ability to manipulate BCH blocks.
Bitmain and Jihan Wu have a significant influence over the Chinese cryptocurrency mining community. As the largest mining equipment manufacturer and mining pool operator, Bitmain could also switch its hash power from BTC to BCH to fight against CoinGeek and Calvin Ayre.
If that is to happen, then the hash rate of BTC will decline in the short-term, which could potentially lead to difficulties in mining blocks at a fast rate, slowing down the network.
Conclusively, if the hash rate war between CoinGeek and Bitcoin Cash continues, then it will have a negative impact on both Bitcoin and Bitcoin Cash. As the most dominant cryptocurrency in the market, any negative sentiment surrounding BTC will inevitably pose an effect on the rest of the market.
“People are concerned that both Bitcoin and Bitcoin Cash markets, their networks might slow down, they might not work as well, the software upgrade may not go through or if it does go through, we will end up with some chaos. People started selling, that triggered stops, everybody got concerned. The entire market settled down. In my view, a very short-term event,” explained Kelly, adding that his fund invested during the downtrend.
If the hash power conflict between CoinGeek and BCH caused the drop, then it is possible that it continues to affect the crypto market in the weeks to come.
Due to the intensity of the sell-off in the market, while a corrective rally is always a possibility, it is more likely for the crypto market to remain in the low region of $180 billion in the short-term.
Last modified: May 20, 2020 2:25 PM UTC