Buying Bitcoin: August 1st And Everything After – Seeking Alpha

Weve said previously how important August 1st is in the cryptocurrency world. August 1st is a signaled date in which decisions about Bitcointhe largest and first cryptocurrencywill be made. The repercussions of this go far beyond Bitcoin and will be a sign of things to come. Its also the first date in which the world beyond crypto first adopters will be watching, as new consortiums have joined into the burgeoning industry.

To show just how far thats come, lets look at some current figures. The entirety of cryptocurrency (including crypto assets and protocols) is around $90 million. Bitcoin itself represents half of that. The first huge news Bitcoin garnered was when its coin price hit $1,000which was in September 2013. During 2015 it made more headlines, as it crashed back down to $200. Its made headlines throughout this year as its price has crossed $2,000 and neared $3,000 and most recently has continued to make news as the August 1st deadline approaches.

What happens onand afterAugust 1st is crucial for any investor in Bitcoin.

The first crucial point is on the regulation (not financially, but in terms of stability) of the bitcoin protocol and problem-solving.

This is all born out of identified problems with Bitcoin, from both investors and miners (if youre not within this world, you can think of miners as financial verifiers). Bitcoin was moving too slowly and too expensively, and the future scaling viability looked meek given these. Without a central presence propping up and/or regulating Bitcoin, these issues could go unsolved, plummeting the value for investors and scaring away miners, who earn the currency by doing work to verify transactions.

Because theres no central authority, users will signal problem-solving methods, which is essentially like a vote.

So we see now that two things are going to happen within Bitcoin. The first is a hard-fork. Hard-forks create new coins, with new code, and potentially new use cases. So we expect that a new coincalled Bitcoin Cashwill be introduced. This article explains Bitcoin Cash for the curious. Essentially its implementing the things that Bitcoin will not be doing on August 1st. It will have its own investors who believe that August 1st BTC solutions are not viable enough. Exchanges are already preparing to support Bitcoin Cash for trading. Keep an eye out for its movement.

The second implementation is called SegWit (which stands for segregated witness). This is meant to increase blocksize (allow for more transactions to be tied into a block and to resolve a bit of troubled spot in the software. You can read more here. This is good news for most, and the value of Bitcoin is up 10% in the last 30 days, reflecting investor confidence.

The second crucial part of all of this, however, is what it means for the value of Bitcoin and your role as an investor.

There have been two camps lately on this aspect: one that points out that, while this implementation cycle has been steady in the last few weeks, it caused more panic and volatility than necessary over the last few months. Its also likely to bring some ups and downs to Bitcoin Cash post August 1st. But I think its important to remember that this wont be the last time there will be signaling needed for updates.

Mahin Gupta, co-founder and CTO of Zebpay told Investopedia, Bitcoin is a decentralized technology. Which means discussions on changes to the network happen in the open, in public and not behind closed conference room doors. These debates are visible and can be messy. This is a feature of bitcoin, not a problem. Such debates are not a one-time issue. They will keep happening as bitcoin grows in popularity. I am confident that the community will come to a consensus soon and then we shall debate how to scale it again.

Gupta is right. Bitcoin, lacking the central authority and community of its younger brother Ethereum, is going to continue to have debates over its scalability. These will not subside, and indeed, will likely cause future forks, debates, and panic. Investors need to take this into effect, as the technology behind Bitcoin will need sporadic updating.

The second camp thinks that this is a major hump to get throughwith more attention and money in this as ever before (see first paragraphs). A Goldman Sachs analyst recently said Bitcoin could hit $5,000 (nearly double its current value), mostly based of the scarcity of the coin itself. The analyst, Ronnie Moss, thinks theres more room to grow before this enters bubble territory as well.

Other analysts have the same sky-high expectations, showing that with more adoption, especially by larger nations around the world, Bitcoin has been on a rocket upward and will continue to trend, based on that adoption. The linked article compares Bitcoins current rise to the Internets in the mid-90s, a comparison many like to use.

Okay, so where does this get us?

In terms of investing, this is a huge moment. Bitcoin is successfully implementing large-scale upgrades with $45 billion invested in it. This can set the precedent for future implementations and debate. This means it can continue to use its momentum (adoption and recognition from global superpowers) to see its value rise nearer to $3,000 and potentially beyond.

Yet, well need more time and adoption to see if it can go much further than that. Other coins and technologies are easier to pivot and update that can do exactly what Bitcoin is doing. As its so large that implementations take time (this one has been talked about since late May) and happen slowly.

This will not be the end and if Bitcoin Cash succeeds, it sets a dangerous precedent for hard-forking off of Bitcoin every time a group of miners or exchanges demand changes be made. If Bitcoins value is hard-forked along with new coins that users find liquidity in, its value will tumble. Same too with any P/E ratio expectations (heres a chart for that, albeit built by a coder himself).

The short call is that Bitcoin value will likely rise on the good news and momentum. The long-term outlook right now is seeing how Bitcoin Cash plays out and if Segwit works, or if it immediately sparks new debate on upgrades. If we see the latter, Bitcoin may be in for a rough road to have any sustained value gain.

Disclosure: I am/we are long BTC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Buying Bitcoin: August 1st And Everything After - Seeking Alpha