Will The Bitcoin System Change Drastically in 2017
Bitcoin continues to be as popular as it is volatile. Prices have been fluctuating since the beginning of the year, hitting an all-time high at more than $1,300 per unit a couple of weeks ago. Nevertheless, value has yet to stabilize for a number of factors.
The cryptocurrency market has more competitors entering the game every day, with alternatives like Ethereum and Litecoin gaining more ground in the digital world. Still, they all suffer similar setbacks when it comes to prices.
Below, we take a look at the seemingly unusual phenomenon that has been affecting Bitcoin value over the last couple of months. Cryptocurrency still has to pass some big hurdles if it ever wants to stabilize as a trustworthy option to gold and bonds.
The market is small and it moves fast
When compared to precious metal markets like gold and silver, the market size of Bitcoin is so small that it makes it too easy for someone to come one day and make a major investment that would significantly impact currency movements.
Forbes estimates that with just a $50 million buyout of Bitcoin in one day, the market would flip causing volatile price hikes and plunges across the world.
Doing this, of course, is not as easy as it sounds, but it remains a possibility that fuels distrust among traditional investors in safer value-preservation assets.
Is Bitcoin as good as Gold or bonds?
While Bitcoin has been gaining many supporters and endorsements that legitimize it as a real-world currency, it still doesn’t have as much credibility as more traditional methods such as stock shares and precious metals.
The inherent issues of Bitcoin trading make it a hard sell to most people not well-versed in next-generation finances and transactions, and particularly cryptocurrency.
Moreover, there is no regulatory body creates rules for the Bitcoin market which is why is so appealing to certain groups on the Internet. However, economists have been increasingly talking about digital money could end up in its adoption and regulation.
There is a hard fork in the Bitcoin horizon
There is an unresolved paradigm that deals with how the Bitcoin transaction system works at its core, but that issue is coming to an end in what many predict will split the virtual currency in two.
Essentially, the Bitcoin transaction process deals with exchanges through a network that can no longer support the high-demand of users, miners, developers, and others that use it every day, thus slowing and halting its growth both in price and adoption.
Two potential solutions have come up, but only one of them will be implemented by developers of the Bitcoin network once community consensus reaches 95% for either option.
The first, Bitcoin Unlimited, would grant greater power over the network to miners, who would decide to “increase” its capacity if and when needed. This option has faced some technical difficulties in the past during its development phase.
Segregated Witness, on the other hand, would “double” the capacity of the network and allow a greater influx of transactions while also retaining decentralized control over it. This, however, is not the greatest long-term solution since it is still limited.
Pressure from third parties to implement such a framework that would enhance transaction volumes in the Bitcoin network. The impending possibility of change has the market on its toes which also explains the radical price changes.
Either choice will have a permanent impact in Bitcoin as we know it, effectively splitting the cryptocurrency into two parallel systems that will compete and affect each other’s price with a high projected correlation.
Source: Coinbase
David