Why Bitcoin Prices Today Are Climbing Past $3,500

This is a syndicated repost courtesy of Money Morning – We Make Investing Profitable. To view original, click here. Reposted with permission.

Bitcoin prices today are climbing after two controversies subsided and investors gained more confidence in the future of the world’s oldest and most valuable cryptocurrency.

Bitcoin prices today are climbing

According to the CoinDesk Bitcoin Price Index, the price of Bitcoin surged today (Friday) to an all-time high of $3,586.23 around 8 a.m., surpassing Tuesday’s high-water mark of $3,538.04.

Bitcoin prices are up about 24% over the past week (up $690), 53% over the past month (up $1,233), and 268% year to date (up $2,596).

The swiftly climbing Bitcoin prices have raised hopes the digital currency will reach $4,000 or even $5,000 by the end of the year.

Several major developments drove this week’s surge in Bitcoin prices. Here’s what happened…

Hard Fork Unexpectedly Pushes Bitcoin Prices Higher

Many cryptocurrency investors dreaded the Aug. 1 Bitcoin hard fork.

A segment of the Bitcoin community that wanted a different solution to the two-year-long debate over how to scale the network to accommodate the rising number of transactions created a new variant of Bitcoin called Bitcoin Cash. This version of Bitcoin can process blocks of transactions of up to eight megabytes, much larger than the one-megabyte limit on “legacy” Bitcoin.

Special Report: Cannabis Is the Gold Rush of the 21st Century – 30 Stocks to Invest in Now. Read more…

But Bitcoin Cash is incompatible with legacy Bitcoin, despite the similar names. After Aug. 1, Bitcoin Cash became its own cryptocurrency and started trading on several cryptocurrency exchanges.

Most people assumed – myself included – that a split this severe would create confusion and uncertainty among Bitcoin investors. The expectation was for high volatility and a drop in the price of Bitcoin.

Bitcoin prices

But the hard fork went more smoothly than anyone expected. Relief that the legacy Bitcoin version was left unharmed by the existence of Bitcoin Cash encouraged investors to buy.

A side effect of the hard fork also helped drive more money into Bitcoin.

Anyone who owned Bitcoin prior to the hard fork ended up with an equal amount of Bitcoin Cash after the fork. Many of those folks rushed to “dump” their windfall Bitcoin Cash by selling it in an exchange for legacy Bitcoin. The extra buying helped push up the price.

Meanwhile, the Bitcoin Cash price struggled to stay above $200 for several days. But so far it has withstood the “dumping” fairly well. As of today, Bitcoin Cash had risen to about $330.

Those who held onto both versions have enjoyed a 10-day combined gain of 44%.

But Bitcoin investors also had something else to cheer about…

Bitcoin Leaps the SegWit2x Hurdle

SegWit2x is a solution to the scaling debate that was proposed in February using some coding tricks to squeeze more transactions into each one-megabyte block.

The week before the hard fork, Bitcoin miners signaled support for SegWit2x. But as a precaution, the SegWit2x proposal didn’t “lock in” right away.

Related: How to Find the Best Bitcoin Exchange for You

That finally occurred this week. The prospect of a widely accepted solution to the scaling issue was taken as a major positive for Bitcoin. It was yet another green light to buyers.

The lifting of this headwind, along with the catalysts resulting from the hard fork, gave the price of Bitcoin one of its strongest boosts of the year.

But despite the air of celebration in many corners of the Bitcoin universe, a dark event lurks in the near future that could send prices spinning in the opposite direction.

Yet hardly anyone is talking about this…

The Biggest Threat to Bitcoin Prices Right Now

While many are pleased that SegWit2x is happening, what people are overlooking is that the proposal has two parts. The “SegWit” part has to do with squeezing more transactions into each block.

But the “2x” part – a plan to double the maximum block size to two megabytes – won’t take effect until sometime around November. And that’s not baked into the lock-in we just had this week.

bitcoin prices today

Because the SegWit portion had such broad support, many assumed the 2x portion would go nearly as smoothly. After all, the part of the community most vocal in their opposition to SegWit2x were the Bitcoin Cash folks – and they have their own version now.

But this transition will prove to be very rocky.

For one thing, the 2x part of the SegWit2x proposal will require more than miners signaling support for it. It requires a hard fork (yes, another hard fork). That wouldn’t be a problem if nearly all of the Bitcoin community is on board, but this week it became clear a key segment of the community plans to resist the block size increase portion of the proposal.

I’m talking about the Bitcoin Core developers. They’re the handful of programmers with the power to change the legacy Bitcoin code. And while they were OK with SegWit, they oppose any increase in the size of the blocks.

The Bitcoin Core developers are planning to change the code in their software to ignore anyone running the SegWit2x version of Bitcoin. As with Bitcoin Cash, we’d end up with another, third version of Bitcoin as a result.

This presents a risk of major turmoil to the network, depending on how much support there is for each option.

A lot of miners and Bitcoin companies agreed to the SegWit2x proposal and are expected to follow that route. But no one is sure how deep that commitment runs.

Ideally, one path will gain enough traction that most everyone using legacy Bitcoin now will follow it. But an ugly split is also possible. This would sow confusion among investors, namely, which one will be the “real” Bitcoin? (Bitcoin Cash advocates already claim that their version is the “real” Bitcoin, but so far have only drawn in a minority of the community.)

While such a split isn’t likely to destroy Bitcoin, it could cause steep price drops and a period of volatility.

As we’ve seen over the past two weeks, Bitcoin is extraordinarily resilient. It will survive this test in November, but investors need to be prepared for some turbulence.

To get full access to all Money Morning content, click here

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

Disclaimer: © 2017 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.

The post Why Bitcoin Prices Today Are Climbing Past $3,500 appeared first on Money Morning – We Make Investing Profitable.

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I am a contractor for Money Map Press, publisher of Money Morning, Sure Money, and other information products. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. In some cases I receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

Leave a Reply