Almost immediately after the disapproval of the Winklevoss twins’ Bitcoin ETF, contrary to the predictions of most analysts, Bitcoin price recovered, surging back to $1,250. On March 16, Bitcoin price declined again to the $1,160 mark.
While an increase in Bitcoin price is important for everyone within the network and community, in consideration of the current status of the Bitcoin network, it is optimal for Bitcoin price to remain relatively stable at the $1,160 margin.
If Bitcoin price had continued to increase in value after the initial ETF recovery to the $1,300 region and reached an all-time high price, extensive mainstream media coverage and intensive hype around Bitcoin would have led to a massive short-term increase in Bitcoin price.
For investors and traders that sustain a reserve of Bitcoin for short-term gains, the abovementioned situation would be ideal. However, the Bitcoin community is currently in the midst of addressing serious scalability issues to eliminate or at least reduce Blockchain congestion. The fee market has grown significantly over the past few months and the average fee per transaction has been on the rise.
In fact, Coinbase announced that it will not be handling Bitcoin transaction fees for users anymore for that reason. Ankur Nandwani, the product manager at Coinbase, stated:
“We will discontinue paying network transaction fees for on-chain transactions starting March 21st, 2017. Network transaction fees do not go to Coinbase, they go to the miners of the Bitcoin and Ethereum networks. Since our inception, we have been paying network fees on behalf of our customers to help support the growth of the bitcoin and ethereum networks. We now have over 6 million users worldwide, and this has become a significant cost.”
Moreover, Bitcoin lacks off-chain scaling solutions such as the Lightning Network which enable microtransactions and open Bitcoin to a new generation of applications. With off-chain solutions, platforms and applications will be able to make extremely cheap, fast and secure transactions with ease, which allows the introduction of a wider range of Bitcoin-based services.
The majority of the community is beginning to favor Segregated Witness (SegWit) over Bitcoin Unlimited because of the internal bugs found in the software of Bitcoin Unlimited. The errors of Bitcoin Unlimited led to a 6-hour downtime for miners and shut down 500 nodes almost instantly. According to security and Bitcoin expert Andreas Antonopoulos, the recent Bitcoin Unlimited bug would have led to millions of dollars in losses if it was being forked.
“This time there was little economic impact. During a fork, the damage would have been in the millions. QA matters. It matters millions.”
While developers, miners and community members are building consensus on which software and solution to adopt in order to scale the Bitcoin network properly, cautiously and efficiently, it is for the best interest of the Bitcoin community as a whole that Bitcoin price maintains stable at the $1,160 region. It relieves pressure on the network and it grants a larger time period for the community and the market to decide upon the viable solution.