Bitcoin, Ether Down 5% as Aug 1 "Fork" Schism Looms

Cryptocurrency Carnage - Bitcoin Trades Below $2200, Ether Tumbles Below $200

via zerohedge

The ten largest cryptocurrencies (by market cap) are all getting hammered once again today as the August 1st deadline for Bitcoin's 'civil war' looms ever closer.

As Bloomberg reports, it’s time for bitcoin traders to batten down the hatches.

The notoriously volatile cryptocurrency, whose 160 percent surge this year has captivated everyone from Wall Street bankers to Chinese grandmothers, could be headed for one of its most turbulent stretches yet.

Blame the bitcoin civil war. After two years of largely behind-the-scenes bickering, rival factions of computer whizzes who play key roles in bitcoin’s upkeep are poised to adopt two competing software updates at the end of the month. That has raised the possibility that bitcoin will split in two, an unprecedented event that would send shockwaves through the $41 billion market.

While both sides have big incentives to reach a consensus, bitcoin’s lack of a central authority has made compromise difficult. Even professional traders who’ve followed the dispute’s twists and turns aren’t sure how it will all pan out. Their advice: brace for volatility and be ready to act fast once a clear outcome emerges.

“It’s a high-stakes game of chicken,” said Arthur Hayes, a former market maker at Citigroup Inc. who now runs BitMEX, a bitcoin derivatives venue in Hong Kong. “If you’re a trader, there’s a lot of uncertainty as to what happens. Once there’s a definitive signal about what will be done, the price could move very quickly.”


All the largest market cap coins are getting slammed...


SKG- One problem relates to scalabilty or the lack thereof. The current solution is related to "forking the blockchain", which we wont pretend to grasp fully ourselves.

But people who do understand to have opined as late as yesterday on the outcome for prices.  Steve Kanaval thinks

I believe digital currencies incorporate future events in the same way stocks do, the release of earnings or the introduction of a new product will be reflected in pricing in many stocks 90 to 180 days before earnings are released or a new product generates sales, and the share price will reflect future events. Digital currencies are doing the same thing here anticipating chaos in front of the August 1 decision about a bitcoin hard or soft fork.  The recent sell-off in nearly all DC’s have priced in the results of the August events in advance, and I think prices have already endured the worst and should stabilize after some initial Aug 1 (day of) volatility.  I think the fork is already priced into the market.

The hardfork/softfork issue is attempting to resolve normal growth issues related to slow trade rates.  The only way for this particular problem to be solved is by increasing the dimensions of their present blockchain. Doing this requires modification of this code. This is the point where the Bitcoin fork comes into play.

Today's activity does suggest there is a scramble of holders changing hands. we could be looking at volatility presenting an opportunity, or a precursor to much more difficulty in scale. Either way, the volatility may continue through the Aug 1 deadline. And if the industry is like many others, decisions will be put off where they can be. This is as much a human issue as a tech one. 

Once again it is the so-called 'civil war' that is weighing on the entire virtual currency space as we noted previously, behind the conflict is an ideological split about bitcoin's rightful identity...

Some have suggested this drop may also be exaggerated by India's decision to tax Bitcoin like gold.

it is being reported that taxes are the probable outcome from this enquiry which will render the cryptocurrency legal, but also affect its growth as a decentralized alternative currency.

It seems likely that the regulatory regime that comes in to monitor Bitcoin and its affiliated digital currencies will fall under the Securities and Exchange Board of India (SEBI).

This board will then hope to treat digital currencies much like gold; trading it on registered exchanges and thus promoting a formal tax.

This will also allow the regulators to keep tabs on the transactions in order to stop nefarious uses such as money laundering, terror funding, and drug trafficking

If a split occurs, bitcoin will likely begin existing on both blockchains in parallel, resulting in two versions of the cryptocurrency. Expect traders to quickly re-price the value of both, likely leading to massive volatility.

“It’s moderates versus extremists,” said Atlanta-based Stephen Pair, chief executive officer of BitPay, one of the world’s largest bitcoin wallets. “It depends on how much a person values the majority of people staying on one chain at least for a little while longer, versus splitting and allowing each pursuing their own vision for scaling.”

As a reminder, investing legend Michgael Novogratz recently noted, that he’s looking to add more ether if it falls between $200 and $150... and more bitcoin if it falls to $2,000.

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