Plunging 15% in one day! Bitcoin falls below $30,000 as retail investors frantically search “What’s going on?”
A possible event driver has surfaced as searches for the phrase “bitcoin double spend” spike on Google. Analysts believe that the market panic should have originated from a blog post.
Bitcoin was sold off sharply again today, plunging more than 17% during the day to below $29,000, down more than $6,000 from the day’s high, almost back to the level at the beginning of the year.
It was about a week after Bitcoin plunged again intraday, dropping more than $5,000 intraday on last Friday, making the week ending that day the worst single-week performance in four months. Such a dive caught many retail investors off guard: what the hell is going on?
A possible event driver has surfaced as searches for the phrase “bitcoin double spend” spike on Google. Analysts believe that the market panic should have originated from a blog post.
A report in a trading blog raises the issue of “double spending” on bitcoin, where a person uses the same digital currency in two separate transactions. This would be like someone buying a car, paying the seller, driving the new car away, and then getting all the money back. In the case of blockchain, the problematic transactions would be excluded from the final count of the digital ledger.
But after the fact, analysts think it’s really no big deal. Nic Carter, co-founder of data firm Coin Metrics, said, “In this case, it doesn’t look like the merchant was cheated. It doesn’t seem catastrophic to me, it could just be an experiment or a software bug.”
Bitcoin was created to be a digital currency that doesn’t require any centralized authority to back it or regulate transactions. Unlike traditional transactions where electronic transfers are handled by banking software, Bitcoin is transacted on the blockchain — essentially saying it’s a spreadsheet that records when Bitcoins are transferred and where they arrive. After verification by an independent third party, the transaction is recorded on the blockchain.
The blockchain is theoretically immutable, helping to prevent fraud and making transactions irreversible. Double spending in effect means that the blockchain has been manipulated, thus eliminating Bitcoin’s pioneering security statement.
But merchants often wait up to six times for payment validation. In the double-spend case above, the transfer was apparently only verified once before being booked and then canceled.
Carter says that rarely will a payment be confirmed as final after a single verification. What can happen is that two blocks (the cryptographic term used for verification) make the same transaction at the same address, but ultimately the entire block is excluded.
Andreas Antonopoulos, an expert in Bitcoin and open blockchain technology, said:
“The Bitcoin blockchain is working exactly as designed and has been working as designed for 12 years. What we’re seeing today is a reorganization of a block. This happens on average every two weeks and is a normal part of that consensus algorithm.”
Over the past seven days, bitcoin has experienced a roller coaster pullback, falling and piercing its 10-day average for three consecutive days. Compared to the all-time high of nearly $42,000 earlier this month, it has dropped more than $10,000 in just a few days.
The controversy surrounding the price of bitcoin continues: those who believe it will rise again believe that institutions are maturing in their knowledge of the digital currency and using it as a hedge against inflation, while opponents believe it is currently nothing more than another bubble after the 2017 bitcoin crash.
JPMorgan strategists John Normand and Federico Manicardi wrote in a report Thursday that bitcoin has recorded the fastest-ever price appreciation of any major asset and is now priced well above its mining costs, meaning a decline in bitcoin returns will be a given.
Article from Lin Jingyang
Translated by Yang(Mengyan Finance)