After taking a slight break, Bitcoin is now pushing against $13,000 once again. The recent price dip concerned many investors, with the bleeding price leading to a cascade effect down to $9,600. Yet, investors clearly saw the low as an attractive price. Money is flowing back into Bitcoin, regrettably causing a sharp drop in most altcoin values. Bitcoin’s dominance regularly rises during rallies such as this, briefly sidelining other cryptocurrencies. Dominance is also a positive sign of sustainability for BTC, suggesting that the price will remain on an upward trend for now.
As Bitcoin remains above $10,000, it brings with it a familiar phenomenon. In 2017, Bitcoin reached its all-time high through a sudden flood of new investors. These investors were not crypto-enthusiasts or tech minded investors, but average people that had now heard of Bitcoin in mainstream media. Many of these investors don’t fully understand the volatility of the cryptocurrency asset class. So while they temporarily surge the price of BTC, they may also lead to sharper crashes.
Other 2017 Growing Pains Resume
Bitcoin’s high value comes with some drawbacks. Alongside higher value, the Bitcoin blockchain also sees a higher number of transactions. This sudden spike in traffic creates a validation slow-down. Transactions can sometimes take days to properly complete. Further, mining fees begin to ramp up as demand increases. The inability to easily transfer BTC may have even contributed to the previous crash.
The introduction of several scaling solutions may help alleviate these problems. However, their development is not yet complete. The Lightning Network, an off-chain solution for Bitcoin transactions reports that usage is actually down since the beginning of the rally. Most developers admit that these solutions are not yet ready for broad use.
The Bitcoin Mining Situation
The prolonged period of low prices for Bitcoin had an adverse impact on miners. Unable to turn a profit, many miners liquidated their hardware and left the market entirely. This leaves the new rally in a crunch, as demand for validation vastly outstrips supply. The mining difficulty of Bitcoin is on the rise, requiring greater power to mine a single block. Despite this, the hash power directed at BTC is increasingly rapidly, with new miners jumping into the fray.
Bitcoin’s next block reward halving is approaching – on schedule for a 2020 event. This will make mining more difficult. But, it historically causes a rise in the value of BTC as well.
Article By: Adam Stone