After the cancelled SegWit2x hardfork, Bitcoin prices soared in the immediate aftermath. Without the threat of a competing Bitcoin blockchain, long-term investors and cryptocurrency programmers breathed a sigh of relief. The flagship asset of digital markets, Bitcoin could now trade under one common brand identity, or so we were led to believe.
After Bitcoin prices flirted with the $8,000 level, a sudden correction occurred that took the cryptocurrency to the low $7,000s, and then into the high $6,000s. At time of writing, Bitcoin trades at a little over $6,200. In contrast, the hardfork offshoot Bitcoin Cash shot up to over $1,500, and appears likely to challenge $2,000 over the next few days.
What exactly happened here? Without the SegWit2x hardfork, Bitcoin Cash is the new and improved flagship cryptocurrency. That has had a detrimental impact on Bitcoin prices, and not just in the profitability sense. As Crush The Street contributor Eric Grisholm pointed out, volume for Bitcoin and Bitcoin Cash neared parity. Today, Bitcoin Cash volume exceeds the original.
Are we approaching a paradigm shift in cryptocurrencies? Here are my three takeaways:
Bitcoin Cash is the Real Deal
While hardcore Bitcoin proponents may not like to hear this, Bitcoin Cash is the real deal. Shortly after its hardfork launch, Bitcoin Cash peaked slightly above $1,000 before crashing back down to earth. But in doing so, the offshoot digital token created a rounding bottom formation.
It’s no wonder that Bitcoin Cash reached four-digits, and now that it has broken firmly above $1,000, we can confirm that the rounding bottom pattern is in full swing. In other words, watch out for higher valuations!
Bitcoin May Correct to $5,500
I’m still a big believer in Bitcoin. However, we have to acknowledge reality — Bitcoin prices reflect panic mode. It appeared that proponents escaped a bullet when the SegWit2x hardfork was cancelled. However, with renewed sentiment towards Bitcoin Cash, we have to ride the volatility for what it is.
Should the panicked sentiment continue, look for Bitcoin prices to correct between $5,500 to $5,800, where strong technical support lies. I’ll be surprised if it falls further, but in any case, be prepared for a discounted opportunity.
No Civil War Necessary
Bitcoin has the brand. Bitcoin Cash has the scalability improvements. Both can co-exist, primarily serving two different functions.
As a store of value, Bitcoin is gold; nothing else comes close. But as a transactional vehicle, Bitcoin Cash has many of the upgrades that the SegWit2x hardfork called for. Thus, I’m not worried about the long-term potential for either cryptocurrency.