Bitcoin prices entered into bear market territory Tuesday as an embarrassing legal case kicked off in Japan and experts continue to squabble over key changes to the cryptocurrency's infrastructure.
Bitcoins were quoted at $2,320 each on the London Bitsmap exchange during Tuesday trading, a 21.3% decline from the all-time high of $2,954 reached on June 11. Bear markets are typically defined as a fall of 20% or more from a recent peak price. Gold, in contrast, has fallen around 6.6% since reaching their 2017 peak of $1,296.17 on June 6.
Pressure on both assets, which have gained investment reputations as a store of value amid the erosion of trust in so-called fiat currencies such as the U.S. dollar and the euro, has risen significantly in recent weeks as global central banks signal similarly-timed increases in interest rates, making traditional assets and investments more attractive than those which rely solely on their capital gains.
Bitcoin's slide into bear market territory also comes, with some degree of irony, on the opening day of a trial in Tokyo in which prosecutors are attempting to convict Mark Karpeles, the former head of the now-defunct Mt. Gox cryptocurrency exchange, on charges of fraud and embezzlement linked to the theft of 850,000 bitcoins -- worth around $470 million at the time -- and $28 million on cash in 2014.
The hacking theft sent bitcoin prices into a tailspin and raised serious questions over the currency's security to cyber attacks.
With those questions in mind, Bitcoin's "creators", in the form of core software engineers and the so-called "miners" that research and validate transactions in exchange for cryptocurrency payment, are attempting to reach an agreement that could allow for a faster expansion of the bitcoin base.
Blockchain, the architecture that supports bitcoin's existence, has a cap on the information it can process, which some argue slows the speed of payment processing. To ease that congestion, software developers would like to allow some data to leave the spine of the bitcoin system, a move the bitcoin miners say would reduce their ability to verify transactions, thus eroding their "bullet proof" appeal.
At present, a compromise agreement is set to be put in place later this month that, if adopted more broadly, would effectively become standard on August 1. However, if developers and miners can't agree, or won't honor, the compromise, a potential spilt in the bitcoin "chain" could result in dual currencies and transactions that could significantly reduce prices from their current levels.
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