The price of Bitcoin saw large gains last week- in anticipation of a major code update, known as SegWit2x, which was due to happen around- November 16. The upgrade would have increased the size of blocks on the blockchain powering Bitcoin from 1 MB to 2 MB. This would have increased the speed and size of transactions that can be processed on the Bitcoin blockchain, making it more efficient.
However,- on Wednesday- the update was- postponed until further notice- due to a lack of consensus in the Bitcoin developer community. As a result, over the weekend the price of Bitcoin tumbled as low as $5,600 from an earlier record high of $7,800,- recovering somewhat- to $6,496 at the time of writing.
Over the same period, two rival cryptocurrencies based on underlying networks with more processing power saw massive gains:
- Bitcoin Cash, the cryptocurrency that- split off from Bitcoin in August, hit $800 late- on Friday, and went on to almost double in price in the next 24 hours to an all-time high of $1,856, according to- CoinMarketCap- data. This resulted in Bitcoin Cash overtaking Ether to become the cryptocurrency with the second-highest market capitalization after Bitcoin,- according to CoinDesk. Analysts at- The Wall Street Journal- and- Bloomberg- attributed Bitcoin Cash"s surge to its larger block size of 8 MB, which means it can process transactions quicker and cheaper than Bitcoin, making it a more efficient means of transaction.
- Dash,- a less well-known cryptocurrency, also saw- major price gains- over the weekend, rising from $331- on Friday- to an all-time high of $542- on Sunday, before receding to $438 at the time of writing. That"s likely the result of a Dash developer- announcing- an upgrade to increase Dash"s block size to 2 MB last week, meaning the network on which the cryptocurrency is built now also has a higher block size than Bitcoin"s blockchain, which has stayed capped at 1 MB.
These developments could mean Bitcoin"s developers may rethink the SegWit2x suspension.- That the two cryptocurrencies that rest on networks with higher processing power saw their price increase astronomically over the weekend, while Bitcoin, which rests on a network with lower processing power, saw its price slump, suggests a correlation between block size and investor enthusiasm.
Block size matters because some people are investing in Bitcoin as a means of transaction, which can only be valuable if it can process transactions efficiently, which a small block size would prevent. As such, this latest crash may prompt those who voted to suspend SegWit2 to rethink their decision, especially if investor sentiment keeps souring and funds keep migrating away from the cryptocurrency.
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