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What is scary is the fact that liquidity is extremely low on exchanges like Bitmex. It means that we do not need huge volume to see further decline. Even with average volume of first drop we may see further decline because there is no potentail buyers.
One more fact is that upside liquidity is low too. There is no people that are willing to short. It means that in case some potential positive news about main problem ( Hash War ) could cause sudden buying activity that would pump price back to 6k+
Why did drop happen?
One of the strongest mining entities, Bitmain doesn’t want to let CSV ( Satoshi Vision of Bitcoin Cash) to overtake Bitcoin Cash ABC and we are currently in hash war. What does it mean?
Firstly, you need basic knowledge about blockchain. The largest chain is actually the valid one. So, once hard fork occurs, the new coin with higher mining power is creating more blocks and it means it becomes larger chain. It means that chain is valid over the second chain.
Now, Bitmain, one of the largest crypto mining company that is owning BTC.COM and AntPool and that is main shareholder of ViaBTC doesn’t want to leat Bitcoin Cash SV to overtake Bitcoin ABC. If you do not know, Bitcoin Cash ABC and Bitcoin Cash SV are forked coins from Bitcoin cash.
Bitmain is willing to take part of their hasing power from Bitcoin mining pool to move to Bitcoin Cash ABC mining pool in order to beat Bitcoin Cash SV. As the Bitmain is the main mining company in Bitcoin mining, they are ready to decrease their part in Bitcoin mining in order to win this war. It would cause Bitcoin transactions to slow down, transaction fees would increase from 20% up to 30% and block size would decrease from 1 MB to 0.6 MB.
This could create huge drop in Bitcoin price but we think it will be only short term event and these are 2 main reasons.
Bitmain again, has huge hash power waiting on the side. This mining machines are not working yet and it is not small part but huge. So, if they move part of they active mining power to Bitcoin cash ABC, they could easilt turn on these inactive machines and become the biggest in Bitcoin again and everything would be stable again.
Another reason is that Bitmain is willing to go online and they are thinking about IPO. If they causew drop in Bitcoin price by mining manipulation, they could be sued by investors and other mining pools and it would cause IPO to be postponed or even canceled and we think that is something they do not want.
So, mining war is between Bitcoin Cash ABC and Bitcoin Cash SV, two new forked coins of Bitcoin cash. The war is not between real Bitcoin that is worth currently $5500 but between 2 Bitcoin Cash forks.
It could affect Bitcoin price because part of Bitcoin mining hash power could be moved to Bitcoin Cash ABC in order to beat Bitcoin Cash SV. So, potential decrease in Bitcoin hash power is main reason why investors are scared.
But good news that Bitmain has huge inactive mining power that could be activated very soon and they can get the Bitcoin hash power to normal and everything would be in normal again. So, thats why we suggest members 2 things. Avoid margin trading because even spikes to 4k could happen but also all the way up to 7k because there is no liquidity and price can move very fast. Another suggestion is not to panic because this could last few weeks and everything would be back to normal and it probably include price to normal.
Our opinion on Bitcoin Cash ABC and Bitcoin Cash SV is that it is nonsense. Bitcoin Cash community was already quite low in comparison to Bitcoin and now once it is splitted into 2 new chains, it would cause split in price and support so our opinion is that this wont happen any of these coins. The potential mining war could cause the death of one of them because defeated chain would probably die and winning one will continue its way to achieve its targets.
The hash war would affect both of these entities. It is just ego and nothing else. This is how rich people are playing with their money. Both of them are multibillionaire companies. Bitcoin is great change in future of money but it didn’t exclude power of the minority. Cryprocurrencies are future but it is question if Bitcoin is future. It didn’t achieve its main goal to be decentralized. If 2 entities can play with their money and affect all of us, it is best example of centralization.
We hope you got enough information to create hour own opinion. Avoid margin trading and calm down and think twice before doing anything!