Why Bitcoin is Down?
Last 24 hours were pretty wild for Bitcoin as it went from ~$19k to ~$17k in a day, and the price even saw $15.6k on Bitfinex a few hours ago.
I’d like to note a few things, since I think it may help people better understand what is going on. I might be wrong in my evaluation though.
Coinbase just announced that they started accepting Bitcoin Cash. In a few hours though, they suspended trading as the price went to $8500, according to people reporting on bitcointalk.org (source). The price was $3600 on Bitfinex at some point, and $3115 at the time of writing.
Bitcoin.com cofounder Emil Oldenburg publicly stated that he is selling his Bitcoins and buying Bitcoin Cash due to high transaction costs and lead times. (source)
Bitcoin exchange Youbit declared bankruptcy. (source)
A very similar event took place around November 12. For 48 hours, it was profitable to mine Bitcoin Cash instead of Bitcoin, and Bitcoin Cash price went from ~$760 to ~$2450 (~220% increase). Around the same time, Bitcoin went from ~$7200 to ~$5700, losing more than 1/5th of its value. On November 13, Bitcoin Cash switched to a faster changing difficulty algorithm, and most of the miners that switched to Bitcoin Cash went back to mining Bitcoin, and the effect of this was reflected in the price of both currencies in the following days.
Price changes were definitely wilder last time, but the important thing to note is this: This may turn into a biweekly thing.
Bitcoin gets its difficulty adjustment at every 2016 blocks (~2 weeks), whereas Bitcoin Cash has a different algorithm and its difficulty is adjusted more frequently. Bitcoin Cash is a fork of Bitcoin, meaning that miners can easily switch between mining these currencies. We have now seen at least twice that miners respond to such incentive changes, so I’d suggest keeping an eye on the difficulty adjustment date for Bitcoin if you are trading any of these currencies. [https://fork.lol/pow/retarget]
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This article only expresses my own opinions, do not use it as the basis of your investment decisions. I might be completely wrong.
Trading cryptocurrencies involves high risk. Do your own due diligence before investing.