Based on growing optimism that faster transaction times will hasten the spread of the cryptocurrency, bitcoin soared past $4,000 for the first time.
After a plan to quicken trade execution by moving some data off the main network was activated last week, noting a gain of nearly 17 percent since Friday, the largest digital tender jumped to a peak of $4,187 Monday. A new version of the asset called Bitcoin Cash was spun off earlier this month in opposition because the solution — termed SegWit2x — had been so contentious.
Some of the design features that had fueled bitcoin’s popularity — the decentralized verification procedures that ensured against hacking and government oversight and growing demand for the virtual currency was the reason for rise of tensions as well as the split. There are however lingering concerns remain around the capacity to increase transaction volumes even while this month’s confrontation ended up as little more than a speed bump in bitcoin’s more than 300 percent rally in 2017.
“Up until now a lot of people didn’t really believe bitcoin could go any higher until the scaling issue is resolved,” said Arthur Hayes, Hong Kong-based founder of bitcoin exchange BitMEX. “With this actually being implemented on protocol, theoretically the amount of transactions that can be processed at a reasonable speed is going to be much higher, so a lot of people are very bullish about bitcoin now.”
Transactions started to slow as its popularity boomed because of a cap on the amount of data processed by bitcoin’s blockchain. Two groups – one supported by miners that sought a larger increase in the block size and another – the SegWit2x solution backed by a group of developers, resulted in the division of the community. The former then became Bitcoin Cash.
Bitcoin Cash has neither disrupted its progenitor’s operations nor undercut its appeal and its price has retreated since peaking right after its birth.
There are also challenges even while SegWit2x has garnered enough support for activation. In a possibility that’s still mired in debate, its next stage involves doubling the block size to 2 megabytes some time in November.
Hayes said that the need for another “hard fork” to upgrade the bitcoin again has been obviated by Bitcoin Cash — with a block size of 8 megabytes is what some are arguing and this reduced support could thwart the step mentioned earlier.
But related businesses have been bolstered by the cryptocurrency’s staggering price surge. It’s received a $100 million investment, announced digital currency exchange Coinbase Inc. on Thursday. According to blockchain.info, compared with 16.5 million that had been mined as of Saturday, the supply of bitcoin is capped at 21 million.
People are starting to price in the consumer demand from Coinbase’s $100 million fund-raising round,” said Justin Short, London-based founder of trading platform Nous. “That’s a lot of advertising budget. Every $1 million of marketing brings new demand, which increases the price as the supply is limited by design.”
(Adapted from Bloomberg)