Within a single weekend, from November 11 to 12, the bitcoin price plunged from $7,300 to $5,600, and recovered to $6,200, in less than 48 hours.
Beginning late Saturday evening, the bitcoin price began to fall from $7,300 to $6,900, as Bitcoin Cash started to record major gains. By Sunday morning, the price of Bitcoin Cash has surpassed $2,900, a new all-time high, while the price of bitcoin plummeted to $5,600.
As such, the rapid surge in the market valuation of Bitcoin Cash and abrupt plunge in the price of bitcoin led to serious market turbulence and uncertainty, as a relatively large portion of investors initiated a sell-off of bitcoin.
Daily Trading Volume Hits $22 Billion
The daily trading volume of the cryptocurrency market achieved $22 billion on Sunday, as the trading volumes of both bitcoin and Bitcoin Cash surpassed $10 billion. Since then, trading volumes have decreased.
According to reports, several major bitcoin investors including bitcoin angel investor Roger Ver sold billions of dollars in bitcoin and allocated the majority of those funds to Bitcoin Cash. As a previous CCN report explained, the sole beneficiary of the cancellation of the SegWit2x hard fork has been Bitcoin Cash, as supporters of SegWit2x migrated to Bitcoin Cash and unified their vision of scaling bitcoin’s on-chain capacity for short-term scaling.
Consequently, the demand for Bitcoin Cash increased in one major region that is South Korea, mostly through Bithumb, the world’s second largest cryptocurrency exchange by trading volume behind Bitfinex. Several cryptocurrency communities in South Korea heavily invested in Bitcoin Cash primarily due to the movement of miners from bitcoin to Bitcoin Cash.
However, traders were made aware that the migration of miners from bitcoin to Bitcoin Cash cannot be permanent, as miners moved when the Bitcoin Cash blockchain was more profitable to mine. Miners are extremely sensitive to profitability, primarily because mining requires a significant amount of resources, capital, and infrastructure.
Hence, in the near future, after a difficulty adjustment on both blockchains, it is likely that miners will move back to bitcoin if it becomes the more profitable blockchain to mine. Because of the tendency of miners to switch between more profitable blockchains, hash power is often not an accurate indicator to utilize to determinate the mid-term growth of a cryptocurrency.
In fact, as Ivie Business School professor JP Vergne wrote, developer activity is usually the most accurate indicator of a cryptocurrency’s price trend.
“We found that the best predictor of a cryptocurrency’s exchange rate is the amount of developer activity around it,” explained Vergne.
What Lies Ahead?
Given that the bitcoin price has stabilized in the $6,200 region and the tendency of bitcoin to rebound to its previous all-time highs, it is likely that the price of bitcoin will soon recover back to the $7,000 region, especially if institutional and retail investors attracted by CME Group and CBOE’s bitcoin futures exchange launch begin to engage in bitcoin trading.