Bitcoin’s ‘Dividend Play’ the Hot Story Now
Speculation about another possible split in Bitcoin is weighing on the value of the hundreds of other digital tokens that have been issued this year as the price of the biggest cryptocurrency soars.
Bitcoin’s underlying network is scheduled to go through a major software upgrade in November to increase transaction speed and reduce costs, it may also cause disruptions.
Investors are playing it safe and shifting funds from other digital currencies into Bitcoin because it typically offers greater liquidity in times of uncertainty.
And there is the bonus of additional coins being issued to owners if developers split the blockchain, the digitized ledger on which the Bitcoin is based. That already happened this week with the creation of Bitcoin Gold, which came about 3 months after Bitcoin cash was created.
As Bitcoin tracks toward another record high, prices of many tokens that startups sold to raise capital are crashing.
The Bletchley Ethereum Token Index is down nearly 16% in the last month.
Around 10% of the money invested in tokens has already flowed out because of the software switch, according to a senior analyst at Digital Asset Research.
That could mean a rude awakening for the many companies planning offerings.
Some 75 ICOs are already scheduled for November, up from 64 last month, according to the data.
The Switch, known in industry lingo as a hard fork, could also lead to other disruptions.
Coinbase, the leading online exchange, will halt Bitcoin buying and selling for 24 hours before the upgrade.
Miners, whose computers support the network, are divided on whether they would support the change, called SegWit2x, or not. That could lead to other issues, such as slow transaction times.
“The markets seem to think that the fork will go smoothly,” said managing partner at crypto hedge fund Multicoin Capital. “I do not believe that it will. If things go extra poorly, it could tank the whole market, or we could see a major flight to Bitcoin/ether.”
Ether is the 2nd-largest cryptocurrency in market value after Bitcoin.
Some investors are 2X’ing down on Bitcoin, hoping a split will bring additional profits. Because not all computers running the network will switch to the new software, that will result in emergence of two competing networks, each running its own version of the currency. Holders of Bitcoin will get both coins.
Bitcoin Cash, the new iteration of the currency when it split for the 1st time last Summer, rallied for almost a month before declining. After a 2nd split this week, Bitcoin continued its rise, while holders also got Bitcoin Gold, which is currently worth about $122.
Bitcoin’s price has more than doubled, to $5,956, since the time of the 1st split.
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