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Cryptocurrency: Bitcoin Retains Gains as Hard Fork Fears Recede

Cryptocurrency: Bitcoin Retains Gains as Hard Fork Fears Recede

Nick Cawley, Strategist

- Recent cryptocurrency losses have been pulled back.

- Volatility remains until new proposals come into force.

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Fears that blockchain may split into two, creating two different bitcoins (BTC), have lessened in the past two days as bitcoin miners have begun to support a new bitcoin improvement proposal (BIP) that would help solve the long-running scaling problems. The proposal BIP 91, would introduce SegWit2X to the blockchain to help speed up the transaction time from the current limit of 1 megabyte every 10 minutes. According to many in the industry, BIP 91 would make implementation of SegWit2X less risky and would decrease the probability of a blockchain split (hard fork).

Over the past couple of days, bitcoin miners have begun signalling support for BIP 91 by adding a piece of code to each new block transaction. If the required 80% support is reached before August 1, the new protocol would be locked-in, lessening the chances of a hard fork. The activation window is 336 blocks and if the 80% target is hit, BIP 91 locks-in and after another 336 blocks are mined it becomes activated.

The latest signalling rate is seen just under 80% of the last 144 blocks mined with several of the largest BTC miners already showing their support for the new proposal, including AntPool, BitClub, Bixin, BTC.com and BitFury.

With the chances of a blockchain split lessening, the price of BTC and most other digital currencies have recovered from Sunday’s heavy sell-off. The future though may be less certain with the recent volatility underscoring the need for cryptocurrency traders to tread carefully in the weeks ahead. The chart below shows BTC still trading below its 100-day ema with a potential resistance level around $2419.

Chart: Bitcoin Four Hour Timeframe (June 14 - July 19, 2017)

Cryptocurrency: Bitcoin Retains Gains as Hard Fork Fears Recede

Chart by IG

Ether (ETH) in the meantime has seen even sharper swings than peer bitcoin slumping from $225 on Sunday to a $137 low before rebounding to trade over $257 late Tuesday.

Chart: Ether Three Hour Chart (July 7– July 19, 2017)

Cryptocurrency: Bitcoin Retains Gains as Hard Fork Fears Recede

Chart by TradingView.

Ethereum however, may soon come under increasing State regulation, over the recent surge in Initial Coin Offerings (ICOs), the cryptocurrency market’s equivalent of traditional equity Initial Public Offerings (IPOs).

Market Moves/Capitalizations – July 14, 2017.

Cryptocurrency

Price/Change%

Market Cap

BITCOIN

$2307 -0.94%

$37.971bn

ETHEREUM

$221.4 +9.5%

$20.68bn

RIPPLE

$0.176 -3.21%

$6.765bn

LITECOIN

$41.93 -4.84%

$2.183bn

ETHEREUM CLASSIC

$15.45 -2.03%

$1.448bn

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

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