Looming Crypto 'Civil War' Sends Virtual Currencies Crashing, Ethereum Below $200

Tyler Durden's picture

Chaos is back in cryptocurrencies with both Ethereum and Bitcoin collapsing in the last few hours as it appears concerns over the so-called 'Bitcoin civil war' are coming to a head.

As Bloomberg reports, it’s time for bitcoin traders to batten down the hatches.

The notoriously volatile cryptocurrency, whose 160 percent surge this year has captivated everyone from Wall Street bankers to Chinese grandmothers, could be headed for one of its most turbulent stretches yet.

 

Blame the bitcoin civil war. After two years of largely behind-the-scenes bickering, rival factions of computer whizzes who play key roles in bitcoin’s upkeep are poised to adopt two competing software updates at the end of the month. That has raised the possibility that bitcoin will split in two, an unprecedented event that would send shockwaves through the $41 billion market.

 

While both sides have big incentives to reach a consensus, bitcoin’s lack of a central authority has made compromise difficult. Even professional traders who’ve followed the dispute’s twists and turns aren’t sure how it will all pan out. Their advice: brace for volatility and be ready to act fast once a clear outcome emerges.

 

“It’s a high-stakes game of chicken,” said Arthur Hayes, a former market maker at Citigroup Inc. who now runs BitMEX, a bitcoin derivatives venue in Hong Kong. “If you’re a trader, there’s a lot of uncertainty as to what happens. Once there’s a definitive signal about what will be done, the price could move very quickly.”

All the largest market cap coins are getting slammed...

 

Ethereum plunged to as low as $189 before ripping back above $200...

 

Aside from Ether's flash-crash, these are the lowest levels since May...

 

Bitcoin was battered below $2300 - its lowest since June 15th...

 

Bloomberg points out that behind the conflict is an ideological split about bitcoin's rightful identity...

The community has bitterly argued whether the cryptocurrency should evolve to appeal to mainstream corporations and become more attractive to traditional capital, or fortify its position as a libertarian beacon; whether it should act more as an asset like gold, or as a payment system.

 

The seeds of the debate were planted years ago: To protect from cyber attacks, bitcoin by design caps the amount of information on its network, called the blockchain. That puts a ceiling on how many transactions it can process -- the so-called block size limit -- just as the currency’s growing popularity is boosting activity. As a result, transaction times and processing fees have soared to record levels this year, curtailing bitcoin’s ability to process payments with the same efficiency as services like Visa Inc.

 

To address this problem, two main schools of thought emerged.

  • On one side are miners, who deploy costly computers to verify transactions and act as the backbone of the blockchain. They’re proposing a straightforward increase to the block size limit.
  • On the other is Core, a group of developers instrumental in upholding bitcoin’s bug-proof software. They insist that to ease blockchain’s traffic jam, some of its data must be managed outside the main network. They claim that not only would it reduce congestion, but also allow other projects including smart contracts to be built on top of bitcoin.

 

But moving data off the blockchain effectively diminishes the influence of miners, the majority of whom are based in China and who have invested millions on giant server farms. Not surprisingly, Core’s proposal, called SegWit, has garnered resistance from miners, the most vocal being Wu Jihan, co-founder of the world’s largest mining organization Antpool.

 

“SegWit is itself a great technology, but the reason it hasn’t taken off is because its interest doesn’t align with miners,” Wu said.

Still, after previous counter-proposals championed by Wu fell through, miners last month agreed to compromise and support SegWit, in exchange for increasing the block size. Wu says the plan will alleviate short-to-medium term congestion and give Core enough time to flesh out a long-term solution. That proposal is what is known as SegWit2x, which implements SegWit and doubles the block size limit.

“You can think of the SegWit2x proposal as an olive branch,” said Wu.

 

Support for SegWit2x has reached levels unseen for previous solutions. About 85 percent of miners have signaled they are willing to run the software once it’s released on July 21, and some of bitcoin’s largest companies have also jumped on board. The unprecedented level of endorsement is partly prompted by anxiety of bitcoin losing its dominant status to ethereum, a newer cryptocurrency whose popularity has soared thanks to its ability to run smart contracts and its more corporate-friendly approach.

Below is an outline of the main events that could unify or divide bitcoin:

By July 21: SegWit2x software is released and supporters begin using it.

July 21 to July 31: The community monitors how many miners deploy SegWit2x:

If more than 80 percent deploy it consistently, that should signal community-wide adoption of SegWit and the avoidance of a split, at least for now.

 

But if a majority do not deploy, expect anxiety within the community to grow as the focus shifts to the Aug. 1 deadline.

Aug. 1: UASF is deployed by its supporters, who begin checking if bitcoin transactions are compliant with SegWit.

If a majority of miners still do not deploy SegWit2x or otherwise accept SegWit, and if UASF supporters do not back down, then two versions of bitcoin’s blockchain could come into existence: a UASF-backed one where only SegWit transactions are recognized, and another where all trades -- SegWit and non-SegWit -- are recognized.

 

If a split occurs, bitcoin will likely begin existing on both blockchains in parallel, resulting in two versions of the cryptocurrency. Expect traders to quickly re-price the value of both, likely leading to massive volatility.

“It’s moderates versus extremists,” said Atlanta-based Stephen Pair, chief executive officer of BitPay, one of the world’s largest bitcoin wallets. “It depends on how much a person values the majority of people staying on one chain at least for a little while longer, versus splitting and allowing each pursuing their own vision for scaling.”

As a reminder, investing legend Michgael Novogratz recently noted, that he’s looking to add more ether if it falls between $200 and $150... and more bitcoin if it falls to $2,000.

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AtATrESICI's picture

What say the crypto bulls?

Raffie's picture

All predicted in Clif High's web bot report last month.

Mass pull back to almost %50 then BOOm off to the races again.

Amaroosta's picture

BITCOIN IS GOIN TO $50k!

btw

WHO WANTS TO BUY MY BITCOINS?

nope-1004's picture

Goldman called it a week ago, by publishing this piece about how everyone should jump in cuz it's going to $4,000.

http://www.zerohedge.com/news/2017-07-03/goldman-sees-bitcoin-soaring-hi...

My comment on that thread is pretty prophetic, hey?  And I'm not even Cliff High!!!  Just seen how the big banks operate too many times.

 

This hit aint over either.  It's going to crash hard, and that's the way Goldman operates for .gov, doing its fiduciary duty!!!

 

Lets_Eat_Ben's picture

Cryptos are the robots that will take most people's jobs.

 

Software applications using blockchain will replace 3rd party intermediaries in most sectors. This tech will be as revolutionary as the internet.

 

Dollar valuation volatility doesn't mean shit in the long run

BadLibertarian's picture

Yeah, but SAP, Microsoft, Mercedes, etc., etc., - pretty sure they spent significant time and money figuring out how to power their supply chains with tulips back in the day, right? /s

BaBaBouy's picture

I only have Paper BITcoinz Not Physical, What do I do ?????????????

giovanni_f's picture

He just wants to cry.

With CC it is the same as with the so-called "Internet", you know, that over-hyped short-lived tech fad that is long since forgotten along with such names like google, ebay, paypal, alibaba.

it is just fascinating how machine-like all those anti-crypto oracles are getting triggered to creep out of their holes to tell us they-told-us-so on each and every CC decline. Of course CCs are a perfect basis for a scam, such as Ripple, EOS, IOTA and all those CC/ICO ponzi schemes. Of course there is NO WAY to realize all those virtual CC gains made in the last couple of months. It was perfectly clear that the next correction would be even more brutal as the last ones but more unsuspecting suckers would be affected and even more self-proclaimed oracles would strut around like mating pigeons in the ZH comment section.

fx's picture

"What say the crypto bulls?"

I say, BTFD! Ethereum couldn't care less for BTC-infighting. It's a high uncertaintly-low risk situiation, that is approaching.
ETH may fall below $70-100 and that would likely be the last great buying oppotunity before the biggggg take-off. As for BTC it may or may not survive. Having a stake in both plus litecoin and ripple should serve you well.
Of course, do that speculation only with money that you can afford to lose.

giovanni_f's picture

"I only have Paper BITcoinz Not Physical, What do I do ?????????????"

This you can do: Do with your BTC what you planned to do with all those rock-solid yellen-managed, virtual, crypto, bank-account US-dollar units exactly in the moment hyperinflation sets in.

 

JethroBodien's picture

Don't you mean Goldman are doing Gods work??

AtATrESICI's picture

Where did the around 23,000,000,000 go??? Per coinmarketcap.com a few minutes ago the total crypto Market Cap: $84,903,981,188. From memory the market cap at its high a week or two ago was around 107 billion. On vacation?

GUS100CORRINA's picture

Looming Crypto 'Civil War' Sends Virtual Currencies Crashing, Ethereum Below $200

My response: This entire Crypto complex is looking like the WILD, WILD WEST on STEROIDS!

tmosley's picture

>I don't understand how market caps work

You really shouldn't be commenting.

AtATrESICI's picture

Please let me know how Market Capitalization works ?

tmosley's picture

Since you asked nicely--it is a mostly meaningless number that is simply the number of outstanding instruments times the last traded value.

Only a retard would think you could cash out the entire complex for that much cash.

AtATrESICI's picture

This morning I put about 288 usd worth of btc on my shift card by noon the the first number dropped to 269. So that is not a lot of usd in my case but when you think of that aggregate throughout the system it is not nothing.

 

As far as not being able to rig markets with billions. Keep dreaming. Only a retard would think that institutional investors could not move cash in and out of the systems that they have a hand in creating.

tmosley's picture

That's a complex hallucination you are experiencing. Not sure what you think it has to do with things like "market caps" or "long term prices".

ebworthen's picture

I'm sure there is a grower in Holland who will take Bitcoin in exchange for some Black Tulips.

He's got some magic beans too; Golden Goose and all that.

Kaiser Sousa's picture

i sold all my Gold & Silver at the all time adjusted REAL inflationary lows and bought a new Crypto-currency...

its called Bernanke-Coin...

to the moon bithcez...

DEATH TO THE MONEYCHANGERS.

and this crypto-maddness btw....

Raffie's picture

Not long from now and all will be better then ever, doubt I will see your kind here when once again you will be proven wrong.

In the mean time great time to buy more.

To bad you don't see PM and cryptos are against the same enemy. It's ok... if Darwin's theory of evolution is correct your generations from now will get what I am saying.

Have a good evening fool.

Sudden Debt's picture

your  generation? :)

YOUR generation is the first generation with a total lack of interest in the world, no ambition and a total lack of knowledge.

You still believe that "this new thing" will make you filth rich without any effort.

Why don't you just go to vegas with your knowledge?

You'll lose all your pennies with the comming crypto crash. 

The first big level where it will crash is 1100//1200

and after that, there's even a risk of dropping to 120 dollars because of the panick that will follow.

I sure hope you'll have the guts to come back to this board when you've lot your parents money.

HappyDeathMetal's picture

And if it doesn't wil you have the guts to admit you were wrong?

Osmium's picture

I warned everyone last week to get out because I bought some LiteCoin.  They never listen.

FinanceNewb's picture

I have his reports and I believe not one said a 50% pullback.... it did say august and then boom it increases bc of banks failing/inflation/etc.

What report and what page does it say 50%... I think your wrong there bud

Sudden Debt's picture

That report was 6 months old!

Don't you ever listen to these reports????

 

passerby's picture

We need a crypto coin for the people that has a small transaction value limit that the big boys would find too cumbersome and trivial to get involved in.

ILikeBoats's picture

It exists already - called DogeCoin.

tmosley's picture

We said this would happen. Volatility is different from risk. Kill one crypto, whether naturally or artificially, and a dozen more will spring up in its place, each having fixed the previous vulnerability. And then the coin you thought was dead will rise as well (witness, Veritaseum).

Hedge your bets, but if you have a portfolio with plenty of coins with good reasons for their existance, you are probably going to gain a lot of purchasing power.

Mustafa Kemal's picture

tmosley, are you hangin tight on this downtrend?  I think Im just gonna stick it out.

Raffie's picture

The crypto pull back correction then moon shot is common.

Hold and go long.

Get into Pillar ICO coming out this weekend. Has great potential. Will go small whale on it myself.

Mustafa Kemal's picture

Thanks for the headsup Raffie

HappyDeathMetal's picture

Nah fuck pillar. THat's mark of the beast tech working with a company called 2030 and the rockefeller endorsed u.n. id2020 program.

tmosley's picture

Yup. Had I been more on the ball, I might have traded it, but I got my allocation like I wanted it, and didn't really want to fuck with it. I do still have lowball bids, one of which has filled on this last bear run.

Peanutz don't remember the gaps I identified a few weeks ago. May yet fill.

booboo's picture

You can's spell Crypto without the word "cry" or for that matter "Crypt"

That aside the currencies are the libertarians of fiat, they will never go anywhere as they refuse to come to grips with the reality of big government

tmosley's picture

Can't spell "silver" without "sliver", which is how much purchasing power most investors have left.

But you keep pumping it.

Pretty pathetic, tbh. Even if it is oversold (kinda like crypto in general, ATM).

Raffie's picture

LOL...

Unlike cryptos physical silver/gold has made mass people rich.................well sort of I guess, really depends how far back in history they want to go to show it.

I'm sure in the far distant future PM will be great, that is unless scientist learn how to make it atom by atom. Then if they do what will PM be worth?

Bunga Bunga's picture

LOL, the 'crypto war' has been going on for a while and brought BTC from $200 to $3,000.

Bay of Pigs's picture

But stay away from physical PM's, right?

therover's picture

Think the price of gold may experience this kind of volatility when the re-pricing starts ?

Raffie's picture

gold will rocket up $5 then get beat down $6.

silver will gain $3 over night then get beat back by $3.50...

BUY PM..... any century now they may do something.

AtATrESICI's picture

I will say I have infinitely more confidence that my PMs will hold value.

Raffie's picture

An in 3-6 generations from now your PM will pay off.

Kaiser Sousa's picture

well at least uve got 5,000 years of monetary history backing ur opinions on Real Money...

 

tmosley's picture

Exactly the same reason why heavy calvary will always will always beat infantry.

GracchusBrothers's picture

Napoleon's "cavalry" that charged Nelson's British infantry squares at Waterloo didn't do so well, did they?