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How Bitcoin Forks Influence Bitcoin Price Rise and Fall

Before the Bitcoin Gold fork two days ago, the market made some interesting moves.

Bitcoin price hit a new all time record Oct. 20, 2017 – five days before the Bitcoin Gold fork – for the first time, for the first time and up to $ 6,200.

Those of you who have already lived through cracks are aware of what usually happens when there is a split in the Bitcoin network. Usually the community complains,,, and become platforms for soap box speeches, and a lot of trash is discussed by factions within the community.

However, did you notice the other? events that are correlated with a share chain? Once a chain separates, you suddenly have a number of split tokens equivalent to the number of chips you had on the Bitcoin network. This is because the new chain will be an exact copy of the Bitcoin Blockchain until the fork will occur.

If the wallet you are using supports the forked chain software, you will be the owner of two digital tokens: Bitcoin and the Forked chain token. In our example, we will use Bitcoin Cash (BCH) as a forked token. When the Bitcoin Cash chain is separated from the main channel, Bitcoin owners have become owners of an equivalent amount of Bitcoin Cash. This is because the chains were identical until the appearance of the fork. If you had 10 BTC before the split, you had 10 BTC and 10 BCH after the split.

This is where the slope becomes slippery. People or organizations whose money amounts are unfathomable can use the ranges as an opportunity to extort the Bitcoin network and the forked network to attract capital gains when a range occurs.

Preparation of the Branch

say that Randy owns 35,000 Bitcoins; worth $ 5,000 per bitcoin, Randy's digital assets are worth $ 175,000,000. Just like anyone who invests a lot in a market, Randy pays attention to information that could affect his position in this market. Randy learns that there will be a hardfork in the Bitcoin network and that the hardfork will create a new token, Bitcoin Cash (BCH).

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On top of that, Randy learns that his Bitcoin wallet provider will support the software forked, so he knows that he will own Bitcoin Cash as well as Bitcoin once the fork occurs. Now, Randy expects to have 35,000 Bitcoin Cash chips in addition to his 35,000 BTCs after the fork. If Randy were to increase his position by millions of US dollars of Bitcoin, he would be the owner of more Bitcoin than he had previously.

However, it would also create a wall of purchase that would drive up the Bitcoin price since it is a major player in the Bitcoin market. When Randy increases the amount of Bitcoin that he owns, he also increases the amount of Bitcoin Cash that he will own once the range occurs.

Because Randy is an educated investor, Randy decides to increase his position in Bitcoin so that he owns 50,000 Bitcoin the day before the pitchfork. Randy did it because he would like to own even more Bitcoin Cash than the 35,000 that he would have had if he had not increased his position in Bitcoin. Now, when the bifurcation occurs, Randy expects to have 50 000 BCH in addition to his 50 000 BTC

What happens when a chain

] When the Bitcoin network branches off, part of the Bitcoin network value splits into a forked chain. When Bitcoin Cash came from the Bitcoin network, Bitcoin's value went from $ 2800 to $ 2700 (July 23, 2017).

 Bitcoin (USD) Price "src =" "title =" Bitcoin (USD) Price "/> Thanks to the fork, Bitcoin Cash was created and was valued at around $ 555 at the time of its launch. (July 23, 2017 </p>
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When Bitcoin went from $ 2,800 to $ 2,700, Randy's digital assets (Bitcoin wealth) dropped from $ 140,000,000 to $ 135,000,000, a $ 5 million loss.However, because of the range, Randy now has 50,000 BCH worth of $ 555 each because Randy is an educated investor and does not intend to use Bitcoin Cash (BCH), he immediately sells so n BCH for a profit at the time the BCH put option becomes available to him on his preferred exchange.

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Randy sells $ 50,000 from his BCH for a profit of $ 27,750,000. A nice gain of $ 28 million (rounded number) to make up for the loss of $ 5 million that he suffered due to the lower price of Bitcoin. At the end of the day, Randy derives approximately $ 23,000,000 from the splitting of the chain

Keep in mind that there are other investors like Randy who are very educated and extremely competent in what they do. In addition, they can execute a similar or even more effective strategy than Randy regarding hardfork; Buy a lot of Bitcoin, anticipate a chain split where you have a number of new altcoins equivalent to the number of Bitcoin you have, sell the altcoin for a profit quickly and then decrease your position in Bitcoin because she is overvalued.

Individuals like Randy are called whales: individuals who hold such important positions in the Bitcoin market, that their buying and selling orders are able to shake the market. Since it only takes a few big players using a similar strategy to increase or decrease the value of Bitcoin, when an opportunity like this arises (a hardfork), the price of Bitcoin may not reflect the true value of Bitcoin.

Since savvy investors know that the Bitcoin price can be artificially high because big players like them are implementing a hardfork strategy, big investors are encouraged to lower their position in Bitcoin once it's over. they executed their hard-fork plan. Indeed, they expect the Bitcoin price to be worth closer to its real value once all the nonsense related to the hard range has disappeared.

Because there are several people like Randy who occupy a relatively important position. the Bitcoin market, when these people decrease their position in Bitcoin to an amount that they are comfortable to own for a period of time (and this number may be nil), their collective offers are able to create a wall of sale that lowers the price Bitcoin

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After the massive sale of both altcoin – because investors find it almost useless for them to keep them in the long run – and Bitcoin – because investors know that the price is artificially high in the short term because of their market strategy – investors capitalize on Bitcoin's low price of the huge sales wall and they buy back Bitcoin that they have previously unloaded.

In addition to the profit that investors derive from the sale In addition, investors will see capital gains by selling their Bitcoin at an artificially high price, then buying back Bitcoin once the price is reduced. During the period when investors buy Bitcoin, we tend to see the price stabilize for a short time

Boom and bust

Investors may have accumulated Bitcoin anticipating a quantity equal and then we sold a significant amount of bitcoin and altcoin – in our example Bitcoin Cash – to reap the massive capital gains available to them.

I can not rule out the possibility that several other market factors have had an effect on soaring Bitcoin prices and the subsequent plummet, but having said that, how do you think that is? that the whales triggered the rise and fall of Bitcoin?