It’s a Wild, Wild Ride!
As I write this, Bitcoin has gone from a high of $7,701 on November 8 to a low of $5,672 on November 11 and modestly back up to $6,520 now (on November 13). We usually see such wild swings when there’s a geopolitical event of some kind. What’s going on now?
The story begins with the aborted SegWik2x fork that was scheduled to happen on November 16, which was called off due to lack of community consensus. Evidently, many investors purchased Bitcoin in anticipation of receiving free SegWik2x tokens following the fork. Now there will be no fork.
Move Over Bitcoin, Here Comes Bitcoin Cash!
Oh boy. Next we stir Bitcoin Cash into the mix.
The folks who purchased Bitcoin expecting free tokens post-fork began to sell, and sell fast, moving their investments to Bitcoin Cash. But it was not just investors; many Bitcoin miners migrated as well. In the Bitcoin community, developers and technology specialists supported aborting the fork; miners and major investors did not.
What happened was a tidal wave of money leaving Bitcoin and migrating to Bitcoin Cash. How much money? Enough to push Bitcoin Cash’s market cap over the $30 billion mark, making them the second-largest crypto-asset and bumping Ethereum down to third place.
The value of a Bitcoin Cash token shot from $660 on November 10 to a peak of $2,446 by Sunday November 12. It nearly quadrupled in two days. It has since fallen back to around $1,400 at the time of writing.
Next, for Good Measure We Toss in… the IRS!
Did we say this was complicated?
On Friday, there was also a decision in the ongoing IRS vs Coinbase case. US Magistrate Judge Jacqueline Scott Corley stated that the IRS has a legitimate basis to investigate Coinbase to verify that citizens are properly reporting and paying federal income taxes on their gains.
The final judgement was mixed. Judge Corley stated she will allow the IRS to investigate people who made money on their transactions from 2013 through 2015, but the agency is barred from probing other accounts. Bloomberg reports that as soon as news of the decision was released, Bitcoin’s price fell 1%.
The wild, wild ride appears to have abated, but problems remain. Due to the sudden deluge of billions of dollars being sold, there are reports of a massive backlog of transactions. This seems logical because many Bitcoin miners stopped verifying transactions.
Although some have called this the death of Bitcoin, this seems to be an exaggeration since Bitcoin price is now firmly back up over $6,000. Things are back to some semblance of normal . . . until we crest the next hill on this roller-coaster ride.