Prominent Bitcoin speculators have established long positions in the currency anticipating windfall profits as SegWit (Segregated Witness) officially activates bringing with it highly anticipated upgrades, but those hopes have yet to be realized leaving many asking the question: ‘Why?’
It is true, the change will bring with it several Bitcoin enhancements. First, SeqWit further optimizes each block by reducing mandatory data inclusions per transaction. This drastically reduces the size of each block (~75% estimated reduction) making transactions quicker and – most importantly – cheaper. Along with this, transaction malleabilities should be eliminated entirely. This addresses what had been a lingering issue for quite some time. Previously, transactions had been subject to possible (but rare) attacks which allowed a hacker to alter the unique transaction ID associated with a transfer causing a double deposit or withdrawal. Block 481,824 has eliminated this threat without question, activating SegWit and propelling Bitcoin and its users into a promising age of boosted capacity and increased security. Marek Palatinus, CEO of SatoshiLabs and founder of Slush Pool praised the SegWit upgrade saying:
“SegWit is a blessing for hardware wallets for many reasons. I actually think that rolling out SegWit will increase security, because it will reduce huge complexity in hardware wallets as it is today.”
Clearly, the technology is getting better, and widespread adoption will surely follow; so why is Bitcoin flat? Consider the price-action seen since the hard fork and subsequent Bitcoin Cash offshoot on August 1st.Bitcoin has appreciated nearly 64% from $2857 to the all-time high of $4479 reached on August 17th, suggesting that much if not all of the expected SegWit euphoria rally has already been built into the price. The currency has managed to effectively hold the $4,000 threshold, however, and that in itself implies strength, likely provided by successful SegWit implementation.
Other factors could be providing equal yet opposite tension on the price of Bitcoin. The IRS, as recently discovered, has been working with associate Chainalysis to track tax evaders who have realized capital gains through cryptocurrency.For Bitcoin investors who believe profits may be realized without the need to pay taxes, it is important to realize that although the IRS does NOT recognize cryptocurrency as “currency”, it DOES recognize it as a capital asset. In that respect it is taxed in much the same way as real estate. With the IRS leaving its paw prints on crypto, this is sure to be unsettling for staunch decentralization proponents, potentially enough to affect coin prices.
Also, remember that SegWit2x is set to contentiously launch in November, casting its own shadow over the successful SegWit launch. With only a few months between SW and SW2x hard forks, some developers worry that corresponding software is being developed hastily and without thorough testing/verification, presenting possible security threats or other loopholes.
Despite sideways movement in the price of Bitcoin, IRS meddling, and uncertainty surrounding SegWit2x, several notable forecasters see Bitcoin capturing $5,000 before the end of the year and upwards of $10,000 by 2019. Many factors will dictate whether or not this becomes a reality, but one thing is for sure: all eyes will be on Bitcoin and SegWit2x in the near future.
Latest posts by Creighton Piper (see all)
- Will “The Man Who Broke the Bank of England” Have a Different Effect on Cryptocurrencies? - April 9, 2018
- SegWit Simplified: How Coinbase Deployment Will Impact Bitcoin and the Market - February 16, 2018
- Quick, Check Your Coinbase! If You Exchanged Fiat–>Crypto Recently You Could Be Missing Funds - February 16, 2018