Could This Currency’s “Independence Day” Trigger Another Massive Move?

Matthew Carr By Matthew Carr, Emerging Trends Strategist, The Oxford Club

Commodities

A little more than 200 years ago, Nathan Rothschild coined one of most well-known investing adages: “Buy on the sound of cannons. Sell to the sound of trumpets.”

His father, Baron Rothschild, had a similar (and perhaps more famous) directive: “Buy when there’s blood in the streets.”

And over the years, the notion has been tweaked and used by other notable investors like Warren Buffett. His folksy truism – “Be greedy when others are fearful and fearful when others are greedy” – is just a modern take on Rothschild’s advice.

The elder Rothschild’s line was about buying real estate following a revolution… literally, when there was blood in the streets.

Well, right now in one currency, we can hear the sound of cannons. And tomorrow (August 1) marks a major event that one side is calling “Independence Day.”

The Sound of Cannons: Another Major Bitcoin Event

In the past, I’ve covered how bitcoin works. Last July, I told readers to expect bitcoin’s price to surge when bitcoin underwent a major change – when the blockchain reward halving went into effect.

This happens every four years. Each time, bitcoin has surged. Since the last halving in July 2016, bitcoin is up 285%.

That performance aside, a bitter debate has been hovering around bitcoin and its future. Every time a “cease-fire” appears to be reached, it seems to fall apart.

Just days ago, on July 20, it looked like a major change to bitcoin was avoided.

But the hard-liners on both sides stated they would push forward no matter what.

More on that in a minute…

Behind Bitcoin’s Breakout Performance and Rise to Prominence

Of all the cryptocurrencies, bitcoin is by far the most recognizable and well-known, as I’ve discussed before.

More importantly, bitcoin has been a fantastic investment.

There are two things investors love about bitcoin.

First, the float is limited. There will only ever be 21 million bitcoins. And as I mentioned, the number of new bitcoin “minted” every four years is cut in half. It’s designed to be mined for 100 years.

Second, the blockchain, bitcoin’s distributed ledger, has the power to be one of the most transformative pieces of technology over the next 50 years, in my opinion. (It can be used for not only transactions, but ownership, taxes and even voting). Every transaction is recorded in the blockchain and is there for the world to verify.

Just this year, the price of bitcoin has gained 155%. Right now, it’s trading for more than $2,500 per bitcoin…

Now, as you can see from the chart, it hasn’t been a smooth incline. There’s been a lot of volatility… especially since June, when bitcoin pierced $3,000.

The Conflict Behind Bitcoin’s Wild Ride

Much of the volatility can be attributed to the blockchain being full. The blocks of transaction data are packed, causing bottlenecks. Transactions that should take only a few minutes to verify are taking hours or days in some cases.

During the past couple of years, two factions in the cryptocurrency community have grown increasingly hostile over whether bitcoin should “fork” into two separate pieces.

Just days ago, it appeared that everyone was going to play nice… and a bitcoin fork wasn’t going to be implemented.

Regardless, on August 1, hard-liners plan to implement the code that will split bitcoin into two separate entities. They’ve declared it their “Independence Day.”

At the moment, the new separate piece – “Bitcoin Cash” – exists only as a contingency plan, in case bitcoin experiences a lot of network instability on August 1. But it’s worth noting that ViaBTC, a Chinese virtual currency exchange, has already added a futures option for Bitcoin Cash.

At the moment, ViaBTC and Bitmain (which operates AntPool, the largest bitcoin mining pool) each said it would support a fork. And that means 30% of the cryptocurrency’s mining power would support Bitcoin Cash.

What does this mean for bitcoin?

At the moment, no one’s quite certain. Nor are they certain what’s going to happen on August 1.

But if there is a split, it could actually be a boon for bitcoin…

Last June, Ethereum introduced a fork in the code. There were dissenters at the time. But the cryptocurrency was forced to fork to prevent $56 million from being stolen from Ethereum’s decentralized autonomous organization (DAO) by hackers.

The DAO had to fork four times last year, including twice in the fourth quarter.

Since January 2016, Ethereum’s price has gone from $0.93 to $206.71. That’s a gain of 22,126%.

In 2017 alone, Ethereum has increased 2,375% from $8.35 to $206.71…

That rise is probably why you’ve even heard of Ethereum. The forks turned out to be a major turning point for the cryptocurrency…

The same could be said for bitcoin and the fork that’s expected to come tomorrow. In the past, changes to the blockchain have sparked massive moves up in price.

Goldman Sachs (NYSE: GS) believes bitcoin could hit $3,600 this year.

I believe it will continue to be one of the most intriguing currency investments in the market… especially since we’ll likely hear the sound of cannons until something is done to address the transaction block crisis.

Good investing,

Matthew

P.S. I’m not the only one keeping an eye on cryptocurrencies. My good friend Adam Sharp, the founder of Early Investing, is watching them like a hawk and has written extensively on the subject.

Adam says that in the next couple of weeks, he’ll be sharing research on new cryptocurrency plays that are flying under the radar…

To read more about his insights on bitcoin and other cryptocurrencies, be sure to sign up for his free, twice-weekly e-letter, Early Investing.