Bitcoin is Still Wildly Volatile

After plunging as much as 29 percent from a record high following the cancellation of a technology upgrade on Nov. 8, the largest cryptocurrency came roaring back in early trading Monday before fluctuating between gains and losses, according to Bloomberg.

While multiple reasons are being cited for the price volatility, one of the more viable is that some investors are switching to alternative coins. Bitcoin cash, an offshoot of bitcoin that includes many of the technical upgrades being debated by developers, has more than doubled in the same period.

“We have seen similar steep falls in bitcoin throughout the year, specifically in June and September, but every time a considerable decline occurs, new investors jump in to experience the new asset class,“ Hussein Sayed, chief market strategist at ForexTime, a currency broker that uses the brand FXTM, wrote in a note.

While markets had been focusing on bitcoin’s more than 500 percent surge this year, bitcoin cash was gaining popularity because of its larger block size. That’s a characteristic that makes transactions cheaper and faster than the original. When a faction of the cryptocurrency community canceled plans to increase bitcoin’s block size on Wednesday, a move that would have created another offshoot, some supporters of bigger blocks rallied around bitcoin cash.

The resulting volatility has been extreme even by bitcoin’s wild standards and comes amid growing interest in cryptocurrencies among regulators, banks and fund managers. While skeptics have called its rapid advance a bubble, the asset has become too big for many on Wall Street to ignore. Even after shrinking as much as $38 billion since Nov. 8, bitcoin boasts a market value of about $110 billion.

Proponents of bitcoin cash believe their approach is simpler and closer to the original goal of bitcoin, which was described primarily as a payment system in its white paper. Supporters of the original bitcoin say that vision is too limited, and that by improving the blockchain with SegWit technology, bitcoin can become a new digital-asset class that not only supports payments but countless other functions.