Bitcoin dives below $7,000

LAGOS (Capital Markets in Africa) – Bitcoin has been on a wild ride since a plan to help the red-hot coin scale was scraped.

Backers of the so-called Segwit2x proposal were considering to split from bitcoin’s main blockchain network, but power-brokers behind the plan called off their support for the upgrade on Wednesday. That mean’s the network will remain intact — at least for now.

Initially, the news sent bitcoin up near $7,900 per coin.  Since then, however, it has tanked close to $1,100. On Friday morning bitcoin fell below $7,000, sliding to a low of $6,707.

It was trading down 4.47% at $6,812 at 10:23 AM EST, according to data from Markets Insider.

Segwit2x would have increased the size of the blocks underpinning the bitcoin blockchain network, which would have enabled it to potentially process more transactions. Backers thought the plan would help the digital currency scale faster.

Many bitcoin enthusiasts and traders viewed the cancellation of Segwit2x as positive, because it would keep the network intact.

“When 2x was called off, it became immediately clear there’s greater consensus for a single bitcoin blockchain and therefore there is greater value retained in the bitcoin ecosystem,” Ned Scott, CEO of Steemit, wrote in a statement to Business Insider after news of the cancellation. “The case was made by the immediate price increase when 2x was called off.”

But on Friday, traders poured into bitcoin cash, a clone coin of bitcoin that has the potential to process much more transactions than both bitcoin and a potential Segwit2x coin.

Bitcoin cash was trading at a record high, up 30% against the dollar to $870.90 Friday morning.

Such volatility is commonplace in cryptocurrencies, a wild west ecosystem that lacks a matured trading infrastructure.

That may change, however, with the development of products such as futures and exchange-traded funds. Two exchange giants have said they were preparing to launch futures in the short term, and an ETF is viewed a likely followup to such a product. Here’s Bank of America Merril Lynch in a note out to clients on the subject:

“We would not overstate this, as a material reduction in volatility would require there to be a large community of speculators prepared to provide liquidity to the natural owners of the various coins, but given the volatility of the coin markets, maybe there already exists a cadre of participants who would look to short coins on strong days and vice versa, which could overall reduce volatility.”