By now, most of my readers should figure out that I’m one of InvestorPlace’s strongest proponents of cryptocurrencies. In fact, I might be the biggest bull among my colleagues. However, I’m also a realist. While many critics may mock me as a “bitcoin shill,” I pride myself in telling it how it is. I genuinely believe that the bitcoin price has much higher to go. At the same time, I advise against taking undue risks.
A prime example is the upcoming Segwit2x hardfork. For those investors lucky enough to have bought bitcoin prior to its first Bitcoin Cash hardfork, supporting wallets and exchanges provided an equal amount of Bitcoin Cash. The situation was similar to a stock split, where only the units were split and not the value. Essentially, investors received free money, giving folks more incentive to invest despite the recently soaring bitcoin price.
I know what you’re thinking because I had the same thought. We have a unique “arbitrage” situation here. If I buy as much bitcoin as I can prior to the Segwit2x hardfork on November 16 (per Coinbase), I’ll receive another round of free money. Considering that Bitcoin Cash almost hit $1,000 upon its introduction, the Segwit2x version can net serious coin (no pun intended).
If you’re gung ho on this plan, I’d advise sitting back and taking a breather. While I don’t believe that the bitcoin price chart has hit bubble territory, we all know cryptocurrencies are incredibly volatile. Should Segwit2x hit $1,000 — a very big assumption — you’re still putting close to $7,000 at risk. You only have roughly a 14% margin in the bitcoin price before your Segwit2x trade becomes a wash.
Beyond the basics of trading psychology, you have much more fundamental concerns to keep you up at night.
Coming Hardfork Threatens More Than the Bitcoin Price
While many bitcoin holders are eagerly awaiting the Segwit2x hardfork for their freebies, the bad news is that it might not happen. The upcoming split involves high-level changes that could threaten the price of bitcoin. More critically, the hardfork risks the underlying blockchain’s credibility.
To understand the Segwit2x problem, we should understand why a hardfork is necessary. Primarily, hardforks address inherent weaknesses or vulnerabilities in a particular currency’s blockchain network. For bitcoin, users are concerned about the digital token’s scalability.
When the cryptocurrency concept was born, few could imagine the immense popularity it would generate. At the beginning of this decade, digital tokens were a novelty. Today, even passersby comment about the bitcoin price chart.
But because bitcoin was the first of its kind, the original developer(s) didn’t integrate scalability into the blockchain architecture. Think of an upstart company that failed to forecast its meteoric revenue growth. For bitcoin to accommodate enormous user volume, the system requires hard programming changes.
If bitcoin was a dictatorship, the changes could be implemented easily. However, it’s a decentralized network, and that means dissenting voices.
Miners, or those who verify the blocks of data in the blockchain, love Segwit2x because it makes mining more efficient. Other users believe Segwit2x gives too much power to miners, and that the hardfork is risky. Should a mishap occur, the blockchain’s integrity would be comprised, and by logical deduction, so would the bitcoin price.
The debate extends far beyond the scope of this article. However, the main point is that free-money hunters may be disappointed. If that is the case, then it stands to reason that you shouldn’t gamble on the bitcoin price for Segwit2x.
No Need to Make Bitcoin Great Again
I, for one, hope that the Segwit2x hardfork doesn’t occur, and I speak as a Bitcoin Cash beneficiary. Too many questions exist surrounding the programming change. Although this may be an “old school” argument, can’t we just leave well enough alone?
Both InvestorPlace contributor Will Ashworth and I are on record stating that the bitcoin price will hit $10,000. Ashworth laid out a gutsy calendar target of October 11, 2018. I guess that’s why he makes the big bucks!
But in all seriousness, we see compelling signs. The bitcoin price chart continues to astound, with the cryptocurrency flirting with $7,000 at time of writing. Zerohedge ran a story indicating that Amazon.com, Inc. (NASDAQ:AMZN) may consider accepting Bitcoin.
I know. Zerohedge has as much credibility as a flat-earther teaching astronomy. I personally view the site as a random collection of BS conspiracy theories and doomsday bunker-isms. Nevertheless, Amazon has registered the following domain names: amazonethereum.com, amazoncryptocurrency.com, amazoncryptocurrencies.com. A “WHOIS” search on all three names reveal that the registrant email is “hostmaster@amazon.com.”
Those speculating on a higher bitcoin price will likely see it. Indeed, cryptocurrency fans have many reasons to believe in the current rally. But a Segwit2x hardfork is definitely not one of them.
Josh Enomoto is long bitcoin.
