Behind the Bitcoin Price Crash a Hashrate War Among the Big Players in the Currency Circle

In the early morning of November 15th, the price of Bitcoin fell below the $6,000 mark to a minimum of $5,544, a record low since 2018. Affected by the “diving” of the Bitcoin price, the market value of the entire digital currency has fallen sharply. According to CoinMarketCap’s data, on the 15th, the overall market value of the digital currency fell by more than 30 billion U.S. dollars.
US$6,000 is an important psychological barrier for Bitcoin. The breakthrough of this psychological barrier has had a great impact on market confidence. “One place is chicken feathers,” a Bitcoin investor described the early morning of the day in the Economic Observer.
The hard fork of Bitcoin Cash (BCH) is considered to be one of the reasons for the sudden drop in the price of Bitcoin. The so-called hard fork is when a digital currency A new chain is split from the chain, and a new currency is generated from it, just like a branch branch, and behind the technical consensus is often a conflict of interest.
BCH itself is Bitcoin’s fork coin. In mid-2018, the BCH community diverged on the technical route of the coin, forming two major factions, and brewing this hard fork. The hard fork finally landed in the early morning of November 16. At present, the two parties are caught in a large-scale “computing power war”-that is, through computing power to affect the stable operation and trading of the counterparty’s currency-it is difficult to achieve in the short term. Win or lose.
The reason for the huge impact on the price of Bitcoin is that the two parties involved in the BCH hard fork battle have abundant resources. These resources include mining machines, computing power, and a large number of stock digital currencies including Bitcoin and BCH. The conflict It is believed to have triggered panic in the market.
Since hitting its peak in early 2018, the entire digital currency market dominated by Bitcoin has continued to shrink. A digital currency funder told the Economic Observer that the fundamental reason is that the entire market is no longer sufficient to support the past. The high currency price of, the follow-up funds are almost exhausted. In this context, neither the mid-year EOS super node election nor the BCH hard fork failed to reinvigorate market confidence, but instead brought about the opposite effect.

Bitcoin price in a “bear market”, can it survive this round of “fork catastrophe”?

Fork “carnival”

The hard fork of BCH is considered to be an important reason for the sharp drop in the price of Bitcoin. This hard fork was officially executed at 00:40 on November 16.

Two hours before the execution of the hard fork, a long-lost carnival has been ushered in the circle of digital currency investors. In the “bear market” that lasted for more than half a year, the activity of digital currency investors was greatly reduced. However, during these two hours, live broadcasts and discussions continued to spread on various media channels and social media. The event is regarded as the “World Cup” in the field of digital currency.
Why does this fork cause so much attention from the market and investors?

The answer has to go back to BCH itself. BCH is one of the forked coins of Bitcoin. In August 2017, in order to solve the problem of the small block capacity of Bitcoin-the capacity of one block of Bitcoin is 1MB, which is considered to cause the low efficiency of Bitcoin transactions. The important reason for this-with the support of a group of large miners, Bitcoin holders and technical personnel, BCH emerged as a fork of Bitcoin. Due to the support of a large number of powerful personnel, BCH gradually became a mainstream digital currency after its birth, and the price once exceeded $500.
Two of the people who prompted the birth of BCH deserve special attention. One is Craig Steven Wright, an Australian businessman who once called himself the founder of Bitcoin Satoshi Nakamoto himself. He has a certain influence in the Bitcoin community and is jokingly called Ao Ben. Cong; the other is Wu Jihan, the founder of Bitmain, whose company has a large number of Bitcoin mining machines and computing power.
A blockchain technology researcher told the Economic Observer that the previous successful fork of BCH from Bitcoin was closely related to the resources and influence of Craig Steven Wright and Wu Jihan, and it was almost the two people and their allies who contributed to it. The birth of BCH.

However, in the middle of this year, the BCH community had a divergence of technical routes. In short, one of them is more inclined to “Bitcoin Fundamentalism”, that is, the Bitcoin system itself is perfect, and BCH only needs to become Focus on a payment transaction system similar to Bitcoin and continue to expand the capacity of the block; while the other party believes that BCH should be developed towards the “infrastructure” route, so that more application scenarios can be implemented based on BCH. Craig Steven Wright and his allies support the former view, while Wu Jihan agrees with the latter view.

Allies draw their swords and face each other.

“Hashing power war”

In the following three months, the two sides began to argue continuously through the Internet, and other influential investors and technical people also stood in line, forming two factions. It is worth noting that the price of BCH itself is also rising in the dispute.

The divergence of the technical route and the entanglements hidden behind made the war looming.

From the night of November 14th to the early morning of the 15th, a social media news picture of “Wu Jihan” going head-on against Satoshi Ao Ben was spread on various channels-this screenshot was finally falsified, and soon, Craig Steven Wright responded and stated that he would smash Bitcoin to $1,000.

The market sentiment collapsed. On November 15th, the price of Bitcoin plunged and fell below US$6,000. As of the time of writing, it was floating around US$5,700.

Amidst the wailing of the market, the BCH hard fork finally kicked off in the early morning of November 16. After two hours of waiting, two new digital currencies were produced as a result of the hard fork, namely: Wu Jihan’s BCH ABC and Craig Steven Wright’s BCH SV, as of 9:34 am on the 16th, ABC leads the BSV side by 31 blocks.
However, this is not the end. A BCH investor believes that given the incompatibility of the two warring parties, after the fork is completed, the outcome must be determined through a “computing power battle”.

The so-called computing power war is to invest enough computing power in the opponent’s blockchain system to affect the normal operation of the opponent’s blockchain system in a series of ways, such as creating a large number of invalid blocks, hindering the normal formation of the chain, and making transactions impossible, etc. . In this process, a large amount of investment in digital currency mining machines is required to generate sufficient computing power, which also means a huge consumption of funds.

According to this investor’s analysis, the decisive point of the BCH computing power battle will be in the trading link: that is, through the input of a large amount of computing power, the stability of the counterparty’s currency will have problems-such as double payment, so that investors can Doubts about the security of this currency eventually caused this currency to be abandoned by the market.

There is no doubt that this will be a protracted “war”.

Bit Jie

In the past half a year, the market value of the entire digital currency market has shown a gradual shrinking trend. Many digital currencies have completely returned to zero or almost no trading volume. Compared with other digital currencies, Bitcoin still maintains a certain degree of resilience. The data is that Bitcoin’s share of global digital currency market value has risen from more than 30% in February this year to more than 50%, becoming the main value support point.

But in this bifurcation event, this support point showed its fragility. A long-term digital currency investor and digital currency fund manager told the Economic Observer that the sharp drop in the price of Bitcoin was not just due to some independent event, but the consumption of market confidence by Bitcoin’s long-term sideways. , The most fundamental reason is that this market has no funds to support prices.

The long-term sluggish market has made some investors and practitioners impatient. A person who once provided market value management for dozens of ICO projects has temporarily left the digital currency field and returned to A shares.

Miners were also evacuated. In mid-October this year, the difficulty of Bitcoin mining began to decline-the difficulty of Bitcoin mining is directly proportional to the input computing power, which means that miners are reducing their investment in this market. In the past two years or so, despite the ups and downs of Bitcoin prices, the difficulty of mining has basically maintained a rapid growth.

“The previous growth has the effect of inertia, and there are also reasons for technological upgrades, but the patience of miners is limited after all. Sufficient returns can not be seen continuously, and the difficulty has been increasing, which will inevitably reduce the subsequent investment. After these computing power inputs are reduced, The difficulty will also be lowered. This is originally Bitcoin’s own coordination mechanism,” said a Bitcoin miner.

There are no obvious signs that these structural declines can be reversed in the short term. The “BCH computing power war” drama that is unfolding on this fragile stage shows no signs of being able to end quickly.

Where will the price of Bitcoin under heavy pressure go?

Post time: May-26-2022