Tuur Demeester, prominent bitcoin analyst and investor, recently stated that the bitcoin price is leading its fourth attempt to surpass the US$4,500 mark and establish a new all-time high.
Unfortunately for investors and traders, the bitcoin price experienced a minor correction earlier today, struggling to test its attempt to rise past US$4,500 and sustain its upward momentum in the short term.
An optimistic indicator of bitcoin’s short-term trend has been its stable daily trading volume, which has been above US$1.6 billion for the past straight four days. Prior to that, when bitcoin’s price was nearing US$4,500, the daily trading volume of bitcoin reached nearly US$4 billion, as the daily trading volume of the entire cryptocurrency market surged past the US$6 billion mark.
Although it is difficult to justify bitcoin’s struggle to overcome its correction and surge past US$4,500, many analysts believe it can be attributed to the congestion of the bitcoin network. Between the Bitcoin Cash mining instability and the lack of SegWit-enabled transactions, the bitcoin network has been failing to clear its mempool of transactions at a sufficient rate.
As the Bitcoin Core development team’s scaling and transaction malleability solution Segregated Witness (SegWit) becomes more widely integrated, the number of SegWit transactions will increase as a result. As wallet platforms implement the functionality, bitcoin fees will also decrease for users making SegWit transactions. However, for users sending and receiving normal transactions, fees will likely be high until the next difficulty adjustment.
The bitcoin network has already improved in terms of network congestion in the past week, as the size of the mempool decreased from over 103 million bytes to 61 million bytes, a 40% improvement. Many transactions that had been stuck in the mempool without any confirmations from miners were cleared, returning stability to the network.
Once bitcoin transaction fees start decreasing at a faster pace due to a decrease in Bitcoin Cash mining profitability, larger adoption of SegWit by service providers and increased number of SegWit transactions, it is likely that bitcoin could test the US$4,500 region and sustain its upward trend until US$5,000.
Jihan Wu, the co-founder of Bitmain, operating company of the largest bitcoin mining pool in Antpool, announced earlier this week that the company was working on fixing bitcoin and Bitcoin Cash mining errors:
“BCC/BTC mining together caused lots of error in the mining pools and empty block is a fall back security measure. It is solved now,” said Wu.
Mining of full blocks by Antpool and other large mining operators will also allow the bitcoin mempool to clear at a faster rate and allow bitcoin transaction fees to decrease. The bitcoin network needs stability in terms of mining and transactions due to its heavy congestion that has left tens of thousands of transactions unconfirmed for days in the past week.
Improvements in scalability thanks to SegWit, decreases in transaction fees and stabilization of the bitcoin network all will lead to a rise in bitcoin’s price in the short-term.