Bitcoin hits a new all time high yesterday – Fork it or Fork off?

11/01/2017

Yesterday, Bitcoin (BTC) broke another magic psychological number reaching $6,500/BTC. After a slight dip, the market continues to buy in today and as of 5 p.m. EST the value was $6,620/BTC.

 

First off – if anyone still has doubts about the continuing value of the cryptocurrency market, this should put another nail in that dusty old coffin. This news isn’t just about another big number, and smacking your head about missing out, there’s a big development coming and it could create an opportunity for the retail investor to jump in again.

Bitcoin is about to fork.

Imagine if you could split an overvalued currency like a stock. Essentially, this is what’s about to happen to bitcoin – the reasons are different, but the effect right now is similar. Although there’s a slim chance the whole thing could get called off, it’s looking less and less likely.

There have been other forks before, folks taking the BTC tech and starting a new blockchain to launch their own currency (e.g. Bitcoin Cash). The new currencies all still follow the same rules as BTC Classic. Some folks are saying this can dilute the overall BTC value – but Mr. $6,500 up there would beg to differ.

This new fork is more serious. It’s what’s called a ‘Hard Fork’.  This new second iteration of Bitcoin will have its own set of rules distinct from the current BTC ecosystem. When it happens BTC owners will now have twice as much in their wallets.

Sounds great! The catch is, one set of BTC will follow the old rules and blockchain. The other set will follow the new BTC standard. Both will use their own sets of rules going forward and evolve independently of each other.

The why of this fork boils down to a debate on how to expand the capacity of the network. Although really a technical debate, it’s devolved into a standard Internet slap fight.

So the reason we’re seeing a run up in value now is because no  one is backing down and the date for the hard fork is set for November 16th or thereabouts. In the meantime, the market got over the jittery stage and is all in, because whichever way the BTC market breaks, getting in before the split insulates you from a lot of risk.

Where do you come in? Here’s my thinking – after the split there will be two things I’m fairly confident of. There will be a ton of volatility in BTC, and the value will go up again eventually. If you like to snipe, set some price warnings and when your preferred fork drops to where you like it, grab some.

The key phrase above is ‘your preferred fork.’ Three scenarios are possible. A. BTC1 and BTC2 each become thriving cryptocurrencies. B. Turns out one side really was right, and one fork withers and dies through natural selection. C. They take each other out in a long cyber war and we all end up eating rats in bombed out basements.

C is the least likely, and of the other two – I’d go for scenario A as being the most likely outcome. Realistically, one will likely be more successful than the other but we’re in such uncharted territory, I don’t know which way to jump.

Full disclosure – I don’t own any cryptocurrency, but I did once suggest to my boss we could use idle government PC time to mine BTC and use it to pay down the deficit in 2011. (He laughed me out of his office).

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