- Bitcoin hit a new record high Friday and was within touching distance of the $8,000 handle
- Coinbase said that there was still a possibility of a planned Segwit2x upgrade happening that would cause bitcoin to split and create a new cryptocurrency
- The possibility of the Segwit2x upgrade appeared to be the catalyst for the rally
Bitcoin hit a new record high Friday, coming within touching distance of the $8,000 handle.
The cryptocurrency was trading at $7,998.40 in the early hours, U.K. time, according to industry website CoinDesk. Bitcoin did pare some of those gains, however, falling as low as $7,535.85; it was trading around $7,750 by mid-morning.
It’s been a wild week for bitcoin, which sold off heavily last weekend, falling to around $5,500. Since Sunday, the cryptocurrency has risen from that low to Friday’s high, marking a 45 percent increase.
In that time, bitcoin’s market capitalization, or the total value of the digital coins in circulation, has risen from $92 billion to $133.5 billion, according to Coinmarketcap.com.
The price dip last weekend came after an upgrade to the bitcoin network, SegWit2x, which was planned for November 16, was called off. The aim was to increase the transaction speeds of SegWit2x, which has increasingly slowed down over the years. If the upgrade took place, it would have caused what is known as a “hard fork,” causing a new bitcoin spin-off to be formed.
But support for the Segwit2x upgrade waned, causing developers to call off its planned implementation.
This appeared to be the initial catalyst for the sell-off.
But on Friday, Coinbase, one of the world’s largest cryptocurrency exchanges, said there is still a possibility of a fork.
David Farmer, director of communications at Coinbase, said on a blog post that a “small number of miners may attempt to go forward with a fork.”
A miner is a key part of the bitcoin network. It is a person who runs a “node”, or a high-powered computer that is able to solve the complex mathematical equitation required to verify bitcoin transactions.
If a large number of miners upgrade the software on their nodes, it could cause a fork. Farmer warned that this small number of miners still supporting the Segwit2x proposal could cause a fork.
If a fork happens, holders of bitcoin will receive the newly-created cryptocurrency called “bitcoin2x” for free, essentially giving them free money. That is why bitcoin rallied Friday.
Coinbase said that it will disable the function of sending and receiving bitcoin at 2 a.m. PT on Friday on its platform, and halt buying and selling an hour before the fork, which is forecast between 6 a.m. and 8 a.m. PT.
All functionality will be re-enabled shortly after, Farmer said.
The Coinbase communications executive said that there are two scenarios that could occur. The first is that the new bitcoin2x network is unusable because there is not enough support, in which case Coinbase will not facilitate trading or withdrawals because “it will not be possible to move these assets.” Farmer said that this is the most likely outcome.
The second scenario is that the bitcoin2x network is usable because miner support is strong.
Bitcoin has had a rocky year but the price has continued to rise and is up around 700 percent. But many critics have thrown cold water on the rise of the cryptocurrency, with JPMorgan Chase CEO Jamie Dimoncalling it a “fraud”. Regulators in some countries have also cracked down on bitcoin trading, with China banning bitcoin exchanges.
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