SegWit2x vs BIP148: What Doesn’t Kill Bitcoin Makes It Stronger

The Bitcoin price dropped sharply from $2,500 last week to $1,850 on Sunday, July 16. In the beginning of this week, Bitcoin managed to recover and moved above a level of $2,000.

Not only the scaling issue drives volatility of Bitcoin price 

Daniel Dabek, founder and architect of Safe Exchange Coin, stated to Coinidol.com that there are three main reasons for Bitcoin’s recent price fall. He said:

“In my opinion the price drop in Bitcoin is related to the following three points:
1. The summer months has volumes decreasing which means fewer buyers are entering the markets due to vacation and people's general lack of interest in playing markets.
2. ICOs and coin holders have been cashing out on the relatively high prices of all of the cryptocurrencies. Especially Ethereum and then to Bitcoin (which is still the most commonly used crypto currency for everyday purchases). 
3. There has been an over subscription to trading on margin long. Which has led to exacerbate the price losses in both Ethereum as well as in Bitcoin. That is also why the bounce from the lowest price was so sudden. The traders who saw this coming got right back into the market.”

He continued:

“August 1st is an impactful timeline because of the segwit decision however the supply and demand situation is more significant. This is because the average market player or newbie investor has little clue what is going on in the Saga related to scaling. The outcome of segwit2x; however, is something that will have significant impact which we will only see after the deciding factors have played out.”

Expecting the continuation of the storm on cryptocurrency markets

The whole cryptocurrency trading market has been panicky shivering this last week. Not just Bitcoin, but also most altcoins, faced massive price falls. Adam Norrie, Portfolio Manager and investment adviser at Bitstocks, a bitcoin investment company from London, believes that the storm surrounding the price of Bitcoin is not over yet. He said:

“In fact, the storm around the entire cryptocurrency market is not over. Bitcoin is heading for a major technical upgrade on August 1st whether you agree with SegWit or not. As a result of this, there are groups throughout the Bitcoin community that are divided about which scaling solution is the best thing for Bitcoin. Consequently, there has been a lot of speculation over a 'coin split' and this, in recent days, is becoming increasingly more likely. During such turbulent times, many people will want to exit their Bitcoin positions in a bid to circumvent the volatility and perhaps with the view to pick up Bitcoin, whichever version may exist, at a cheaper price. I think what is really interesting, is over the weekend when Bitcoin came down quite drastically, Ethereum and many of the other altcoins did so too. This further reiterates how dominant Bitcoin still is in the overall cryptocurrency market and how many of the altcoins still follow Bitcoin's performance. Is the storm over? No, I think this has been just one outburst of a larger period of volatility that lies ahead, across the entire cryptocurrency market.” 

Juan J. Manini-Rios, CEO at SHA256 Trading S.A., a proprietary trading firm and market maker focused on developing and implementing algorithmic trading patterns in bitcoin markets, believes that we are set for a high volatility stretch and expects a continuation of huge swings in both directions.

SegWit2x vs BIP148

The Cryptocurrency community is expecting the decision on Bitcoin’s SegWit2x on July 29 and the vote will begin on July 21. However, according to recent reports, some major miners are already moving to show support in advance of another round of software testing. The world's largest producer of ASIC bitcoin mining hardware, Bitmain, has announced that all of Bitmain’s Bitcoin mining pools have already started running the new SegWit2x software.

Juan J. Manini-Rios thinks that SegWit will get the majority of the hashrate, but bitcoinABC will certainly attract hashrate from Bitcoin purists. He commented:

“Regarding scenarios I believe that at this point in time it is certain bitcoin will fork with SegWit2x and UASF merging into a chain that fits both, at least for the time being, and bitcoinABC which is the Satoshi client with configurable block size and a difficulty reduction algorithm just in case. Looks like SegWit will get the majority hash rate but bitcoinABC will certainly attract hash rate from Bitcoin purists in a similar way as Ethereum Classic did when the DAO hardfork.”

Speculators nervous

Tone Vays, a blockchain consultant, and researcher at LibertyLifeTrail, a cryptocurrency analytics site, commented that there are way too many scenarios of the Bitcoin scaling issue to list. However, the whole fuss around it makes Bitcoin speculators nervous. He stated to Coinidol.com:

“The recent price action makes it pretty clear that a Hard Fork or a Sustained Chain Split expectation will cause speculators to sell and run for the exits early. This recent price drop seems to have been in line with the incompetence of SegWit2x developers crashing their Test Net. The market seemed to be ok with the UASF BIP148 movement and initial plans for BIP91 but now there is a realization that BIP91 can only activate via SegWit2x implementation. This is getting speculators nervous and the risk of developer incompetence (accidental or malicious) might not be worth avoiding Aug 1st events. As for the price, things change by the day so there is no point in speculating 2 weeks out.”

Adam Norrie also believes that there are too many possibilities to speculate upon. He said:

“I think there are an array of different scenarios that could play out by August 1st. There is potential that we could be heading towards a coin split, which is looking increasingly more likely as the UASF supporters and SegWit2x (NYA) grow further apart. Other than this, I feel there are too many possibilities to speculate upon.”

What doesn’t kill you makes you stronger

Alexis Roussel, CoFounder at   Bity, a Crypto-Currency broker in Switzerland, trading with bitcoins and ethers, and managing a network of Bitcoin ATMs, noted that Bitcoin always comes out much stronger from troubled waters. He commented to Coinidol.com:

“It is impossible to foresee how this will settle. From past experience, we can see that bitcoin always comes much stronger out of troubled waters. The most important part, is how users and bitcoin service providers are learning to handle hardforks. This is becoming one of the new norms in the crypto-economy.”

Possible short-term price prognosis

Tone Vays stated to Coinidol.com that, in his opinion, the price had fallen too far too fast and it was time for it to bounce from the $1,950 range. He was expecting it to come back to $2,250 and then we will see if it can be sustained or lower lows are on the way.

By the time of publication on Tuesday, July 18, Bitcoin price shows its recovery and slightly moves up, above the level of $2,300.

Daniel Dabek also commented:

“Going forward I believe that the price of Bitcoin has another surge in it, I do believe that the storm is passing over and that there will be some segment of stability before further gains for Bitcoin. I don't know which way Bitcoin will Fork but the markets will do what is right. Take example, Ethereum forked... we got two coins and both turned out to be highly valuable.”