Bitcoin price ended last week on a rough three-day run, as a drop from around $1,100 per coin to about $950 per coin erased $2 billion in value off of the cryptocurrency.
The big price drop comes as rival factions in bitcoin land are waging a rather pitched battle over the digital currency’s future and the potential currency split.
The issue comes because there is a massive backlog in bitcoin transactions waiting to occur — over the last six months, the number of backlogged transactions has actually tripled, according to reports from bitcoin wallet Blockchain. Since speed is among the features bitcoin uses to distinguish itself from fiat currency, a traffic jam like this is a major issue.
Out of that issue has risen a group called Bitcoin Unlimited, and BU has a solution for the problem: increasing the size of the block, which would allow more transactions to be bunched together and processed. Some bitcoiners — notably famous advocate Roger Ver — have backed the plan. Others think this plan is a security issue waiting to happen.
The bigger issue — and the one affecting price — is the concern that Bitcoin Unlimited (which already has about 11 percent market share of all the bitcoin mining nodes in existence) could actually change the blockchain that undergirds all bitcoin transactions. Moreover, if more than 50 percent of bitcoin miners adopted the BU plan (a fact they can signal by running the BU software on their node) bitcoin will “fork” into two separate blockchains: Bitcoin Core and Bitcoin Unlimited.
Both blockchains would continue to run as long as there are nodes running them. But there would then be a currency split with essentially two different coins — Bitcoin and Bitcoin Unlimited.
And the possibility of bitcoin splitting off is what has pushed down price over the weekend.
“Bitcoin traders may have wanted to offset some of their exposure should a fork occur or the scaling deadlock continue, and ether seems to be the most promising alternative. Bitcoin-ether volumes have surged since and are currently rivaling bitcoin-fiat currency trading liquidity,” Aurélien Menant, founder and CEO of Gatecoin, a regulated blockchain assets exchange based in Hong Kong, told CNBC by email on Friday.
The bitcoin price has started to recover some — as of the writing of this article, bitcoin’s price had gotten back up above $1,000 and was heading into the U.S. market opening 1.26 percent up over the previous day.