6 reasons why it is a bad idea to bet on Bitcoin Gold
Bitcoin (BTC) has surged in the past week while many altcoins were taking a beating. The reason? Bitcoin Gold (BTG).
According to Bloomberg, BTC reached all-time highs Tuesday afternoon: $4,926. Sure Coindesk reported the breach of $5,000 in the start of last month already, but these prices were not seen on the regular exchanges. More importantly though, the surge in price was accompanied by a drop in prices of altcoins and led BTC to reach a4month high of 53.5% market cap.
Investors have been selling their altcoins to increase their positions in BTC.
Why? Bitcoin Gold!
The fork scheduled for 25th of October should provide BTC holders a similar amount of BTG. Just like with Bitcoin Cash investors are expecting ‘free money’ at the time of the fork as they would be able to sell BTG without ever buying it. However there are great risks involved which will be outlined below.
- The process of converting to BTC from altcoins can be expensive. Though prices have rebounded slightly already, the altcoins are still relatively cheap. Once the fork completes, altcoin prices will surge fast and some investors will be left holding the bag (filled with BTC and BTG) while altcoin prices are nowhere near where they sold it.
- Buying BTC from fiat near all-time highs is risky as well of course. Even before the fork occurs BTC prices may come tumbling down due to investors taking profit. Alternatively, after the fork, prices of BTC may decline due to investors converting in BTC. Will the revenues from BTG make up for that? I doubt it. In the long-term BTC is expected to increase in value of course, I also firmly believe in that. But it would be better to buy the dip than at the peak.
- BTG is most likely not as valuable as Bitcoin Cash (BCH) was or still is. People love the fact that it is could solve the central mining problem by turning to Equihash as algorithm, meaning less professional miners can use their GPU’s to start mining BTG as well (instead of the infamous ASIC). BTG is compared against its counterparts in the diagram below:
Recently though, quite a lot of startling issues have surfaced which were very well summarised by Faycal Kilali on reddit:
”BTG (Bitcoin gold is pre-mined 200,000+ BTG, and previously offered as an ICO, now they are trying to hide both of that information from us and telling people to dump their alts to get free "Bitcoin gold". the fork dates do not match, they specified different dates 3 times, once in their github page (1th october, and the block ended up being mined at 28th september) and a third time as 25th of october. all this combined information makes this me believe with no doubt that this is a scam in the making, and you should all dump your BTG as soon as you get it and never, ever buy BTG.”
The fact that BTG is pre-mined means that at least 200,000 BTG will be available in supply already on top of the ones available from the fork. The BTG team also failed to publish that several ICOs were attempted (where 1 BTC would provide 10 BTG);
- The BTG team is reported to have several domains in possession which are “obvious scams”
- The POW implementation is not complete and no code has been submitted in the last month. It doesn’t feature a difficulty adjustment for mining even, which would affect the block time volatility badly
- Finally it is not without danger to use BTG without possible affecting BTC as well. Again Faycal explains:
“Also there is no replay protection, …, just the replay protection alone means you can lose your BTC by trying to sell/transfer your BTG.”
The above arguments are making me hesitant to switch my altcoin positions to BTC at any point in time, unless it is for a profit. It is more likely i will accumulate more altcoins for lower prices as and when they present themselves.
What are you planning to do in the next two weeks?
Let me know in the comments below and stay tuned!
References:
https://www.coindesk.com/5000-bitcoin-price-hits-historic-new-milestone/
https://www.reddit.com/r/CryptoCurrency/comments/757jf4/here_is_why_bitcoingold_is_shady_and_a_scam_you/
http://www.businessinsider.com/bitcoin-price-hits-record-high-above-4900-2017-10?IR=T
https://en.bitcoin.it/wiki/Difficulty
https://medium.com/@EthereumRussian/is-another-hardfork-going-to-kill-bitcoin-bitcoin-gold-e49b24ad8a9
Images:
https://medium.com/@EthereumRussian/is-another-hardfork-going-to-kill-bitcoin-bitcoin-gold-e49b24ad8a9
"dump it as soon as you get it" sounds like a pretty good option to me! I made the mistake of holding my BCC after the August fork. Could have and should have sold it on that initial spike. Lesson learned.
Maybe I'll trade the BTG I get for some STEEM.
haha yes, will probably end up with the same strat...
Love your posts @attalis and analysis... but
I am a bit confused, is Bitcoin Gold the name of the Segwit2x fork coming up or is that something different?
I also find the name Bitcoin Gold super confusing, at first I thought it was a gold backed cryptocurrency, which I was just reading about on @thehutchreport blog: https://steemit.com/gold/@thehutchreport/cryptocurrencies-goldmember-loves-gold-would-he-love-gold-backed-cryptocurrencies-will-you
... but then saw that Bitcoin Gold actually has nothing to do with gold or bullion backed cryptos. (That is a great report actually too worth the read - objective and thoughtful analysis, almost as good as @attalis :) ).
No it is a separate one. the segwit one is in November. Indeed it has nothing to do with gold at all. It is merely a name they have given it. The currency shouldnt be that different from BTC apart from the fact that i think it will be worthless quite soon after the fork.
Ah ok! Thanks!
The whole Bitcoin gold thing doesn't sound like a very stable investment. You confirmed my notion with this information. I think I'll stick to my penny cryptos...
I guess if you dont plan to have BTC in your portfolio, there is nothing to worry about. However we all need to be very careful not to damage our BTC positions when using BTG. I truly hope that no one is making the horrible mistake of using the BTG and losing the BTC in the process...
Anyway thanks for upvoting and commenting.
img credz: pixabay.com
Nice, you got a 4.7% @minnowbooster upgoat, thanks to @attalis
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