Bitcoin soared past $4,000 for the first time on growing optimism faster transaction times will hasten the spread of the cryptocurrency.
The largest digital tender jumped to a peak of $4,216 Monday, a gain of nearly 18 percent since Friday, after a plan to quicken trade execution by moving some data off the main network was activated last week. The solution -- termed SegWit2x -- had been so contentious that a new version of the asset called Bitcoin Cash was spun off earlier this month in opposition.
The split grew out of the tension between growing demand for the virtual currency and some of the design features that had fueled that popularity -- the decentralized verification procedures that ensured against hacking and government oversight. While this month’s confrontation ended up as little more than a speed bump in bitcoin’s more than 300 percent rally in 2017, concerns remain around the capacity to increase transaction volumes.
“Up until now a lot of people didn’t really believe bitcoin could go any higher until the scaling issue is resolved,” said Arthur Hayes, Hong Kong-based founder of bitcoin exchange BitMEX. “With this actually being implemented on protocol, theoretically the amount of transactions that can be processed at a reasonable speed is going to be much higher, so a lot of people are very bullish about bitcoin now.”
Blockchain’s ability to verify participation at every stage of a contract, to have legitimacy across international borders and to act as both a secure and incorruptible ledger was retarded by the slow pace of execution. That is the primary reason why the global bitcoin community agreed to implement the SegWit2x protocol at the beginning of the month. It’s well and good to talk about developing a global payments network but when it takes anything from 20 minutes to hours to transact, the argument loses credibility. The imposition of the new code will greatly speed up the network, allowing greater room for the bitcoin market to expand.
The price broke conclusively out of a two-month range following the hard fork, as confidence returned that the cryptocurrency could survive the transition, and extended the advance today to more than $4000.
It occurs to me that the speed with which the price is advancing is much quicker than we see with any other market. Part of the reason for this is because it is comparatively small, with a global market cap of less than $70 today, around the same size as PayPal. The other reason is because it is a digital asset whose value is based on online participation which is uninhibited by regulators or governments. It’s a proverbial gold rush in the digital field that is accelerating higher. However, since the recent move is an example of an explosive breakout from a range, the benefit of the doubt can be given to the upside until we see the first clear downward dynamic which will likely signal the onset of the next consolidation.