Bitcoin slumped as the cancelation of a technology upgrade prompted some users to switch out of the cryptocurrency, spooking speculators who had profited from a more than 500 percent surge this year.
The cryptocurrency has dropped 5.6 percent since late on Friday, and at one point extended its slide from last week’s record to as much as 29 percent. Bitcoin cash, a rival that split from the original bitcoin in August, has jumped 32 percent since Friday, data compiled by Coinmarketcap.com show.
Bitcoin cash is gaining popularity because of its larger block size, a characteristic that makes transactions cheaper and faster than the original. When a faction of the cryptocurrency community canceled plans to increase bitcoin’s block size on Wednesday — a move that would have created another offshoot — some supporters of bigger blocks rallied around bitcoin cash.
The resulting volatility has been extreme even by bitcoin’s wild standards and comes amid growing interest in cryptocurrencies among regulators, banks and fund managers. While skeptics have called bitcoin’s rapid advance a bubble, it has become too big for many on Wall Street to ignore. Even after shrinking by as much as US$38 billion since Wednesday, bitcoin boasts a market value of US$105 billion.
Supporters of bitcoin’s technology upgrade “are now switching support to bitcoin cash,” said Mike Kayamori, head of Tokyo-based Quoine, the world’s second-most active bitcoin exchange over the past day. “There’s a panic about what’s happening. People shouldn’t panic. Just hold on to both coins until we see how it plays out.”
Bitcoin’s slump dragged down shares of cryptocurrency-related companies, including Hong Kong-based PC Partner Group Ltd, maker of graphics cards that can be used in the mining of digital coins.
The cancelation of last week’s bitcoin upgrade has left users to choose between the two versions of the cryptocurrency. On one side is the original bitcoin, powered by so-called SegWit technology, which aims to improve its performance by moving unessential data off of its underlying blockchain. On the other side is bitcoin cash, which allows its blockchain to handle eight times as much data as the original.
Proponents of bitcoin cash believe their approach is simpler and closer to the original goal of bitcoin, which was described primarily as a payment system in its white paper. Supporters of the original bitcoin say that vision is too limited, and that by improving the blockchain with SegWit technology, bitcoin can become a new digital asset class that not only supports payments but countless other functions.
While bitcoin cash has been around for months, it saw limited support as the community awaited last week’s technology upgrade for the original bitcoin, which promised similar features. Now that the upgrade has been called off, businesses that use the cryptocurrency primarily as a payment method are expected to increase adoption of bitcoin cash.
While bitcoin cash surged over the weekend, it has not been a straight line up. The cryptocurrency was trading at US$1,246 at 7:54am in London yesterday, down from a high of about US$2,478 on Sunday, Coinmarketcap.com prices show.
Bitcoin has been similarly volatile. It is now trading at US$6,242 after touching a record US$7,882 on Wednesday.
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