Cryptocurrency’s market capitalization share tumbles to less than 40%

TOKYO — A possible bitcoin chain split has prompted many investors to shift their money to other virtual currencies.

Bitcoin’s market capitalization share briefly fell below 40%, down from 90% in early March, as other digital currencies such as Ethereum and Ripple boost their presence.

“I want to reduce my Bitcoin position by half by August,” said a retail investor who goes by the handle “bitblt.” He has invested in digital currencies over the past three years or so, but is now trying to avoid risk on fears that the Bitcoin chain could split into several camps on August 1.

According to market data provider CoinDesk, Bitcoin prices topped $3,000 on June 11, but then briefly fell below $2,500 amid growing concern over a potential Bitcoin chain split. Ethereum’s market capitalization is nearly 70% of Bitcoin’s.

Bitcoin has no administrator like a central bank. Why, then, are rumors of a potential chain split emerging?

Bitcoin is managed by blockchain technology, the shared record-keeping protocol central to virtual currencies. Transaction records are compiled by private operators called “miners.” Blockchain users pay fees to miners to authorize transactions.

However, the recent virtual currency boom has helped a surge in transaction volume. As a result, it is taking more time to authorize transactions, heightening calls, particularly among users, for increased writing capacity.

Meanwhile, miners are slow to react because more storage per transaction could result in fewer fees.

Masayuki Tashiro, a bitcoin analyst at the Fisco Cryptocurrency Exchange, said the problem is that the effects of a chain split are unknown. Some exchanges are thinking of suspending Bitcoin trading on and around August 1.

Many investors have shifted their money to other virtual currencies. Prices of Ethereum, which has the second-largest market capitalization share, have increased nearly eightfold over the past three months. Ripple prices have increased by a factor of more than 30 over the same period.

Cryptocurrency’s market capitalization share tumbles to less than 40%

Ethereum now accounts for nearly 30% of total market capitalization, according to market data provider CoinMarketCap.

However, Bitcoin is still the most widely used method of payment at restaurants and stores. Ethereum is expected to become more common for payments at stores after the summer.

Ripple is of little use for retail investors because the currency is expected to be used for remittances between banks.

[Nikkei]