Earlier today, on October 20, the Bitcoin price slightly declined from $5,720 to $5,650. But, within the past 48 hours, the Bitcoin price has surged significantly, as the market gained confidence over Bitcoin’s mid-term rally.
On October 18, the Bitcoin price plunged from above $5,500 to $5,120, as the entire cryptocurrency market endured a major correction. CCN previously reported that leading cryptocurrencies including Ethereum and Ripple have fallen by around 10 percent within 24-hour period.
Traders are Buying the Dip
Prominent Bitcoin traders and investors including Tuur Demeester revealed that they have bought “the dip” as the Bitcoin price plunged below $5,120 in a single day, from over $5,500. It is highly likely that many traders were expecting the price of Bitcoin to correct itself after a strong two-week long rally, which has led to a surge in the Bitcoin price from $4,500 to $5,920.
Quite often, prior to hard forks, the Bitcoin price tends to be highly volatile, as the community and the market decide to support one blockchain over the other. While arguments that SegWit2x supporters and investors are investing in Bitcoin to obtain SegWit2x coin or B2X in November and thus pushing the bitcoin price up are valid, it is more likely that the support over Bitcoin’s mid-term growth is allowing the market to sustain an upward momentum and trend.
More to that, if the market had been concerned in regards to Bitcoin’s performance subsequent to the SegWit2x hard fork in November, the vast majority of traders would have invested in alternative cryptocurrencies (altcoins) rather than Bitcoin. However, that evidently has not been case as the Bitcoin dominance index has increased to 55.9 percent, the highest point since early May.
How Will the SegWit2x Hard Fork Impact Bitcoin Price?
The SegWit2x hard fork, if it will be pursued as planned, is expected to be activated in mid October. Which means, in less than three weeks, another fork of Bitcoin will emerge, apart from Bitcoin Cash.
Several Bitcoin companies and wallet platforms such as Xapo and Blockchain have took a rather controversial approach in addressing the fork, notifying the Bitcoin community that the Bitcoin blockchain will be listed as the minority chain or (BC1) if it has lower hashrate than Bitcoin. But, as Alistair Milne explained in an analytical blog post, miners tend to follow the money and the more profitable blockchain.
“Miners follow the money, they do not lead the money. This has never been illustrated more clearly than by Bcash and the joke that is their difficulty adjustment algo. A rational miner fears the market negatively valuing the tokens they are trying to mine. They are extremely sensitive to profit & loss (no matter how rich they pretend to be),” said Milne.
As seen in Bitcoin Cash, Bitcoin miners had previously moved to the Bitcoin Cash blockcahin network prior to its difficulty adjustment, which allowed Bitcoin Cash to have significant hash power. Almost immediately after Bitcoin Cash became less profitable to mine than Bitcoin, most miners switched back to Bitcoin, including Bitmain and Antpool.
Hence, if companies like Xapo and Blockchain decide to list Bitcoin as a minority chain based on hash rate, which as Milne mentioned is not a practical and accurate way of justifying the majority chain, it could impact the mid-term performance of the Bitcoin price in a negative way.
Still, based on the recent rally of Bitcoin, it is evident that the community and the market are confident that Bitcoin will remain as the majority chain after the fork, which is a positive indicator for the Bitcoin price.
Featured image from Shutterstock.
Last modified: May 21, 2020 9:11 AM UTC