VW 8/1 Fundamentals
This gets complicated because the last week + the next 3 months might be the most important in BTC history if it wants to retain confidence as a “store of value”.
TLDR — I expect highly volatile price action starting 8/1. I lean neutral in the very short term, bearish in the short term, recovery in the medium term, bullish (I think, I need to talk to someone smarter than me about money velocity) in the long term. So, what you should do depends on your time frame.
What we know for sure —
- BIP 91 locked in and activated. This means that after activation, all non-SegWit signaling blocks would be orphaned. BIP91 was an effective “moving of the goalposts” to lower the required miner activation level from 95% to 80%. This forces miners to signal for SegWit.
- 100% of miners are now signaling BIP141. BIP141 is SegWit.
- BIP141 will not lock in this period which ends on July 27th as there aren’t enough blocks left this period. The earliest it will lock in is 8/7 or so.
- We know that some exchanges will start to halt withdrawals and deposits starting on 7/31 because …
- On August 1st, there will be a hard fork coordinated by the Chinese company ViaBTC to create Bitcoin Cash / BitcoinABC (ticker BCC). This hard fork will have onchain scaling with no SegWit ever.
- The BCCBTC pair is currently trading around 0.16 or 16% of the Bitcoin value. If this price were to hold, at the time of the hard fork, BCC would have a market cap of ~$7 billion and would instantly become the 4th highest crypto market cap. A BCC coin would be worth $400+ right now.
- You will get a 1:1 match of free BCC coins for every BTC satoshi you have in your own wallet where you own the private keys. You will simply need to get a BCC wallet after the hard fork, import your keys and you get your BCC.
- Bitmixer.io shutdown which was one of the largest bitcoin mixing services. This should be bearish. Add this to the AlphaBay, Hansa and Dream market shutdowns through increased US LE agencies and demand should be decreasing with rational actors cashing out.
Ok, so what could happen next fundamentals wise?
- If you want your free BCC, you will have to withdraw your BTC from many exchanges. This could limit the supply of coins on exchanges which should decrease sell pressure / sell walls. Since we know that exchanges will halt in/out transfers, prior to July 31st should see a slow decrease of the # of coins on exchanges.
- Economic theory suggests that when we hard fork the price should go down otherwise you could hard fork ad infinitum and create unlimited wealth. So, price after 8/1 of BCC + BTC should be < or = to BTC alone on 7/31. We saw this play out initially for the first few months after the Ethereum DAO hack. So, starting 8/1 could be bearish based on theory alone.
- In crypto there’s some debate about whether hashpower follows price or vice versa. My belief is that it’s much more complicated than that (if I am a miner, today’s price isn’t the only factor influencing where I point my hashpower). On 8/1, there’s at least some hashpower that will leave BTC and point towards BCC. If the BCC price stays where it is now, it may be more profitable to mine the BCC chain. Therefore, the hashpower fundamental points to things being bearish after the hard fork activates.
- BCC is all types of dumpster fire code wise I’m not exactly sure it’s even worth all the effort to move all your coins around. Price says otherwise currently though so I have to keep reminding myself my biases towards the development process / codebase are just that — biases until the code fails.
And now here’s the big one …
4. I have absolutely no earthly idea what some people may do with their large cold storage in this phase of the “civil war”. Me? If the BCC price is still really high by the time I can transfer my coins around, I’m going to sell all my BCC ASAP and use the influx of fiat to buy more BTC. If the BCC price has already tanked, I’m probably going to hold my BCC for a while. I’d like to think that I am in the majority, but who knows. There might be much larger whales than me who might do the reverse which would almost certainly be bearish for price short term. I just don’t know if those people actually exist or if they are just an astroturfed movement. I’m going to imagine I’m overstating this effect in my own mind, but maybe not.
