Let’s join the chorus of headlines reporting on how Bitcoin and other major cryptocurrencies plummeted over the last 48 hours. Let’s delve into how a looming BCH fork triggered widespread panic that created a sell-off and lowered Bitcoin’s market cap below $100 billion USD for the first time in more than a year. Let’s go for that classic click bait headline that will capture the attention of those who are frantically Googling terms such as “Bitcoin price” or “Bitcoin sell-off.” Or perhaps we should just report the news and get it over with? Well maybe we can stick to a different narrative and hope our readers get a different insight.
Bitcoin Sell-Off Reports & What Really Happened
It is widely believed that the BCH fork created a situation in which miners would abandon one chain in favor of the other one. Since BCH and its for are SHA256 coins, Bitcoin miners can in theory, switch their mining power over to the new chain. If enough miners do this, Bitcoin transactions could start accumulating in the mempool waiting for confirmation while the network adjusts to having less computing power on it. That adjustment takes 2 weeks and it may create an economic cost to the miners left behind, which could be left mining on a chain that rewards miners slower than usual until it adjusts.
Looking at Bitcoin’s blockchain explorer it is easy to see that mining power has been on a downward trend over the last 3 weeks. This is not entirely due to the BCH fork; at some level, there must be mining power being idled due to lower Bitcoin prices and the expectation that the situation will not necessarily improve. At the moment, hash rate has dropped by 21% from its peak on August, which means the network had enough time to adjust and transaction confirmation rate should not be affected.
Irrational Dominos Fall
This is precisely the point where our article will differ from many of the ones that have already reported how Bitcoin prices moved below a key resistance level. It is completely irrational to react to a Bitcoin Cash fork with a massive sell-off on Bitcoin and other cryptocurrencies – which don’t even compete with Bitcoin Cash for mining resources. BCH had less than 10% of Bitcoin’s hashing rate prior to the price downfall, and it is unlikely to yield a fork that would be immediately so attractive to Bitcoin miners that they would decide to jump ship en masse.
Hodl Through the Click Bait
Bitcoin, and some of the other cryptocurrencies that saw their price plummet over the last 48 hours, are based on solid fundamentals. Bitcoin itself is probably stronger now than when it faced a sudden drop in hash rate around a year ago. Therefore, the recent sell-off is nothing more than a spiraling domino effect triggered by those who were smart enough to see it coming and enough irrational market actors who took the bait and sold their coins.
One thing is clear: If you are in Bitcoin for fiat gain, then you are more susceptible to those smart market makers and the irrational actors who follow them, than those who will hodl because they believe in Bitcoin. Choosing which camp you are in or what is the level of fiat loss you are willing to stomach, is entirely up to you. Bitcoin keeps on working as advertised.
