Bitcoin cash hard fork resembles an avalanche that turned out to be miners, traders, and the entire industry. The value of major digital currencies falls along with the overall capitalization of the crypto market. Mining becomes unprofitable, and hash rates are decreasing. But is it worth blaming for these events only hard fork?
Recall that as a result of BCH hard fork two competing chains were formed - bitcoin ABC and bitcoin SV. New cryptocurrencies staged a “hash war”. Initially, bitcoin ABC was confidently leading in this competition, but then the confidence in its final victory was shaken. Now, the stable leadership has returned to bitcoin ABC.
However, in BitMEX Research it was estimated that the “competition” so far brings enormous losses. Because of current electricity prices and the complexity of mining, it is unprofitable for miners to mine both cryptocurrencies at the rate at which they do it. According to the data received, each of the parties already lost millions of dollars only on the cost of the electricity aggregated. BitMEX posted their calculation results on its Twitter account:
Hash war estimated costs live update— BitMEX Research (@BitMEXResearch) November 19, 2018
* Estimated leasing fees: $8.1m
* Combined gross losses: $6.1m
Even assuming cheap energy costs, SV miners have a negative gross margin of 353% & $1.4m of gross losses. @CalvinAyre @ProfFaustus cant keep this up forever. pic.twitter.com/CdTQm0vVf4
Also, bitcoin ABC developers included a checkpoint in their latest software release. It ensures the inclusion of the first bitcoin cash ABC unit as a new protocol rule. Thus, any chain without this block will be considered invalid. Such an update may help in the "hash war", but raises a number of questions. The checkpoint implies a certain control over the bitcoin ABC chain from the development team. Users may opt out of the version with this control point, however, this creates the risk of another split.
This will potentially create disagreements that could lead to a new wave of consequences. On November 20, the cryptocurrency market continued its sharp decline, and the cumulative capitalization fell to $145 billion. At the same time, the weighted average rate of Bitcoin fell below $4,500.
All major cryptocurrencies are also in the deep red zone. However, a sharp decline in the weighted average rate of BCH should be noted separately. At the time of writing, according to CoinMarketCap, this price has dropped by 44% to $203 over the past 24 hours. As a result, the coin dropped to the fifth place by capitalization, skipping ahead of Stellar.
However, some experts believe that hard fork is only one of the reasons for the decline in the price of digital money.
“Market participants see different reasons for this dynamic. Hard fork BCH is often remembered, and especially the hash rate war, which could really reduce the difficulty of extracting the standard bitcoin, but the reduction in complexity is also recorded in the bitcoin cash network. Nevertheless, BCH's hard forks with a high probability coincided with the collapse of the market, simply strengthening negative moods. It is worth remembering where the new blocks come from. Surely miners still have a margin of safety and the ability to earn at a loss, but this resource is not infinite,” said CEO of EXANTE, an investment broker, Alexey Kirienko.
He also believes that the market is undergoing a stage of self-cleaning, which has been waited so long on Wall Street to enter as low as possible. Large capital has prepared everything necessary for investment, now it remains to wait when crypto assets really grope "bottom". Kiriyenko explains that experts predict a fall to $3,500, where the reference cryptocurrency will find a foothold and demand from buyers.
Bloomberg Intelligence analyst Mike McGlone agrees with this view, but he gives a more pessimistic price forecast. According to him, the downward trend will continue in the near future, bitcoin could drop by another 70%, to the level of $1,500. Also, some experts believe that the situation will worsen much more, but then there will be a white line. For example, the founder and managing partner of Morgan Creek venture capital firm, Anthony Pompliano, believes that in this way the bear market throws some players out of the game, leaving only entrepreneurs who can create sustainable value.
It is worth noting that there are still victims in the "hash war". On the eve of the hard forks in bitcoin Cash network, the OKEx exchange, without warning, closed several positions on BCH futures for $135 million. Because of this, some traders suffered losses. One of them even filed a complaint against the platform with the Hong Kong Securities and Futures Commission. However, head of the OKEx division, Andy Chung, believes that this decision was aimed at avoiding market manipulation.
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