Bitcoin is experiencing one if its most trying times as public pressure mounts to justify its existence. The warring factions of the Bitcoin Cash (BCH) fork and the loss of $30 billion marketcap combine to create a crisis. All the while, investors, developers, and enterprises caught up in the mist watch helplessly as the market sinks lower. The Bitcoin Cash battle is creating an unsustainable financial situation for the parties in the BCH ABC camp. And the negative speculation and sentiment is forming a pressure point that may cause irreparable damage to crypto in the near future.
What should have been a routine upgrade of the Bitcoin Cash code turned into a quagmire for Bitmain and Bitcoin.com. Early this week Craig Wright, the leading figure in the opposing camp (BCH SV), tweeted that his side achieved majority in hashrate generation. This position not only threatened BCH ABC’s blockchain speed and competitivensss but completely neutralized them.
To avoid total loss, Roger Ver, CEO of the Bitcoin.com mining pool temporarily diverted total mining production to mine BCH ABC exclusively. This is a desperate and possibly illegal action that resulted in the ABC chain pulling ahead of SV at the commencement of the fork. In addition, Bitmain has also funneled additional computing power (98,000 mining rigs) to push ABC’s lead. These decisions were not without consequence; both companies’ pockets are sustaining heavy daily costs. Calvin Ayre, CEO of Coingeek mining pool, who is backing BCH SV, estimates the cost to be in the millions per day.
The real cost can’t be measured until Bitcoin’s prices find a bottom. The contentious battle was the opportunity speculators were waiting to increase their short positions and in a coordinated effort drive prices down. This assumption is verified by the rise in Future contracts building up to this week’s price dump. Technical analysis shows a large Bitcoin sell off triggered a chain reaction likely assisted by trading bots and sell orders. The market was in free fall until it caught a resistance line possibly in pre-positioned buy orders just above $5,100. This ledge was reinforced by buyers who took advantage of the oversold market conditions.
Bitcoin is now in the precarious position of a further price drop. It is at risk of falling to the next resistance line of $4,800 or even $4,000. In addition, it now faces the monumental task of recovering and delivering an expected rally before the end of the year. For all intent and purposes, that goal is all but moot.
Lastly, the compounded mishaps encountered this week will raise many questions. Above all, the validity of Bitcoin as the center of a new global financial system. The price drop alone will show that price manipulation remains a problem. And the infighting within the Bitcoin Cash team will question the nature of future ICOS. The miners ability to decide the future of coins and movement of the market will weigh in on investor’s minds. It poses a question as to whether anything within crypto is truly decentralized. This period in Bitcoin’s time will serve to test its ability to endure. And to prove itself as a worthy object of investment.