After a week long slump, the bitcoin price has recovered to $5,780. The launch of Bitcoin Gold, which has not met the expectations of traders, likely fueled investors to reallocate their funds back into bitcoin.
Bitcoin Gold Caused Bitcoin Price to Decline, Started to Recover
As Cryptocoinsnews previously reported, the execution of the Bitcoin Gold hard fork likely led bitcoin investors to initiate a short-term sell off, to distribute their funds across other alternative cryptocurrencies (altcoins) like Ethereum and Litecoin to avoid the Bitcoin Gold hard fork.
Earlier this week, the development team of Bittrex, the third largest cryptocurrency by trading volume behind Bitfinex and Bithumb, revealed that the codebase of Bitcoin Gold is incomplete, untested, and unaudited. Hence, the Bittrex development team stated that exchanges and wallet platforms will not be able to credit users with Bitcoin Gold unless strong replay protection is implemented.
“At this time, the information and codebase presented by the Bitcoin Gold team is not in a functional state and Bittrex will not commit to opening a Bitcoin Gold trading market,”
said the Bittrex team.
More importantly, Bittrex emphasized that crediting investors with Bitcoin Gold at this phase of development would endanger existing bitcoins, which could lead to larger problems in the short-term. The Bittrex team explained:
“When considering adding tokens to Bittrex exchange we look at the risks involved. Bitcoin Gold does not satisfy our criteria for safety for our users. Taking a snapshot of the Bittrex exchange Bitcoin wallet is also a large disruptive undertaking that requires over 24 hours of preparation (Bitcoin deposits and withdrawals are also suspended during this time) and should not be taken lightly.”
The majority of investors likely did not want to deal with the Bitcoin Gold hard fork because of these circumstances, surrounding the lack of replay protection and the warnings exchanges such as Bittrex have offered in regards to the security and preparation of the Bitcoin Gold codebase.
Consequently, in the past four days, the price of bitcoin remained below the $5,500 mark, even dipping below the $5,300 region at one point.
Analysts including prominent bitcoin investor Tuur Demeester stated that a similar trend can be expected prior to the SegWit2x hard fork on November 16. In the mid-term, the SegWIt2x hard fork, if it is pursued as planned, could negatively affect the price of bitcoin, possibly at a larger magnitude than Bitcoin Gold.
But, in terms of volatility, liquidity, regulations and demand from institutional investors, bitcoin is at an optimal position to lead another rally. Already, some of the strictly regulated bitcoin options, futures, and derivatives exchanges like LedgerX have started to record substantially high trading volumes. Billionaire investors including Mike Novogratz have also revealed that a “herd of institutional investors” are entering the cryptocurrency market.
In the upcoming weeks, at least until the hard fork period of SegWit2x, investors could expect a strong rally from bitcoin, once the $6,000 is broken in the short-term.