Commenting on Bitcoin price dropping 29%, Dr Daniele Bianchi, Warwick Business School's Assistant Professor of Finance. said: "The large drop in Bitcoin prices is probably due to the competition of Bitcoin Cash, which in fact increased its market capitalisation quickly and has now surpassed Ripple and Litecoin, and is approaching Ethereum, according to data from CoinMarketCap. Perhaps frustrated by the cancelled technology update of the original Bitcoin blockchain, which was announced recently, an increasing number of users are switching to Bitcoin Cash which allows for bigger block sizing, giving ample capacity for everybody's transactions, as opposed to Bitcoin's cap at 1MB blocks.
"Indeed, one of the main problems with Bitcoin is that it does not scale up properly as more and more users adopt it. This makes transactions slower and slower as the block size is fixed. In addition, the segregated witness - ie SegWit2x - technology recently introduced by Bitcoin scientists, raised questions about the progressive centralisation of Bitcoins mining towards big servers, something which is fundamentally against the original proposition by Satoshi Nakamoto.
"Bitcoin Cash addressed this issue by increasing the block size to 8MB to accelerate the verification process, with an adjustable level of difficulty to ensure the chain’s survival and transaction verification speed, regardless of the number of miners supporting it. The security of the Bitcoin Cash blockchain, though, is still unclear.
"The internal fighting between Bitcoin to Bitcoin Cash is probably here to stay for few weeks and months. The situation is very fluid, and market valuations are both constantly calibrating and volatile, especially given supply is limited and everything is mostly driven by aggregate demand."
