Bitcoin and its buddies took big hits midweek as market junkies buzzed about a “crypto civil war” these days. What’s up with that?
First up, check out this snapshot of how bitcoin and its buddies have fared in the past seven days as of November 16, 00:43 pm GMT. So much for bulls defending those major support zones! What a sea of red…
Bitcoin Cash hard fork
Last week’s fuss on the Bitcoin Cash upgrade did turn ugly as the community remained deeply divided on which version to support. BCH already split on November 15 but the “mining war” continues.
To recap, Bitcoin ABC introduces a series of technical changes on reordering of transactions to increase block capacity and interoperability between cryptocurrencies. Bitcoin SV rejects those changes and instead restores an earlier code from the original bitcoin protocol (hence the name Satoshi’s Vision) to increase the block size from 32 MB to 128 MB.
So far, Bitcoin SV has the upper hand in terms of hash power as number-crunchers predict it holds around 76.39% of the network’s mining power, but trading volume and price suggests that investors are more confident in Bitcoin ABC.
All the tension between the proponents of each version and the looming uncertainty over Bitcoin Cash’s future has spilled over to the rest of its crypto peers, leading market players to take some money off the table.
Concerns that the Bitcoin Cash drama could also come in play for other digital assets at some point further fueled the FUD in the crypto market, sparking a sharp selloff to yearly lows. So much for wanting volatility to pick up, huh?
By midweek, the total crypto market cap lost roughly $30 billion in less than a day. In a note to clients as reported by Bloomberg, Fundstrat’s Rob Sluymer said:
“This week’s breakdown produced significant technical damage that will likely take weeks, if not months, to repair to create a durable enough price ‘structure’ to support a multi-month rally.”
Some regulatory support
In less gloomy news, there have been a few positive developments in terms of regulation and support from financial leaders.For one, the New York State Department of Financial Services granted yet another BitLicense to NYDIG Execution, which is a subsidiary of the New York Digital Investment Group LLC. This means they are now legally authorized to run crypto-related businesses, including crypto custodial and trade execution services, in the Empire State.
Meanwhile, IMF head Christine Lagarde acknowledged the need to explore central bank digital currencies amid decreasing demand for cash and rising preference for digital money. In her speech, she said:
“I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy.”
A report from the IMF issued a day ahead listed the pros and cons of using this financial tool.
Stablecoins take steps forward
There have also been some signs of progress on the stablecoin front as Binance announced that it is adding support for Circle’s USD Coin (USDC). This follows U.S.-based crypto exchange Coinbase’s decision to list USDC last month, as well as Korea-based Korbit and Japan’s Liquid.
BitGo added even more stablecoins to its mix, including the Winklevoss twins’ Gemini dollar. The exchange’s senior technical product manager told CoinDesk that the addition of more stablecoins was driven by strong demand from investors.
Just be warned, there is a considerable amount of risk in trading cryptocurrencies due to their inherent volatility and sensitivity to headlines. Be careful out there!