Upward Momentum in Bitcoin Price Intensifies on Litecoin’s Role as SegWit Testbed
Over the past month, the price of bitcoin has consistently maintained its upward trend and momentum, increasing from around $1,185 to $1,624 as litecoin moves to implement SegWit. In the past seven days, bitcoin price recorded a 15 percent weekly gain, breaking the $1700 barrier on May 9 for the very first time.
The short and mid-term surge of the bitcoin price coincides with the successful activation of the Bitcoin Core’s development team’s transaction malleability fix and scaling solution Segregated Witness (SegWit) on litecoin. Specifically, Charlie Lee revealed on April 12 that litecoin reached its 75 percent threshold for activation. After the initial approval, litecoin implemented SegWit upon the completion of its two-week lock in period.
In the monthly bitcoin price chart provided by various bitcoin market data providers including Cryptowatch, BTC-USD really began to surge when the 75 percent threshold for SegWit activation on litecoin was met.
As seen in the chart provided above, the bitcoin price began to surge dramatically on April 16, exactly four days after the SegWit activation threshold was met. It can be said that bitcoin price was not directly affected by litecoin’s SegWit threshold activation on April 12 because it still had to undergo a two-week lock-in period led by its miners. In other words, the miners had to maintain the 75 percent threshold for two weeks. In the early stages, Bitmain and its litecoin mining pool declined to support the upgrade.
Ultimately, Charlie Lee, Director of Engineering at Coinbase and Litecoin founder led the Litecoin Roundtable Agreement and convinced the rest of the miners to activate SegWit.
As the probability of SegWit activation and adoption increased, the price of bitcoin continued its upward trend. While many analysts have also attributed bitcoin price’s recent growth trend to the explosive growth in the Japanese bitcoin exchange market and the rise in the demand for bitcoin from institutional investors, based on the price chart and the timeline of SegWit activation, it cannot be denied that the upgrade activation on litecoin had a significant impact on bitcoin price in the mid-term.
There exists a few reason why the bitcoin community highly anticipated the activation of SegWit on litecoin. Structurally and philosophically, litecoin is very similar to bitcoin. In consideration of the similarity between the two, miners including F2Pool previously stated that they would most likely push SegWit on bitcoin if its impact on litecoin is positive. Simply put, miners wanted to observe SegWit’s effect on the on-chain capacity increase of litecoin and the introduction of two-layer solutions such as Lightning.
The Lightning Network has been an important component of the Bitcoin Core team’s scaling roadmap. It also is the Core team’s leverage over the industry and community as Core developers including Luke Jr claimed that Lightning could optimize the current bitcoin block size by up to 90 percent.
On May 3, Charlie announced that the Lightning network will be integrated into litecoin and that the altcoin‘s development team will actively work with Lightning Labs; this should lead to greater interchangeability between bitcoin and litecoin, negating the need for exchanges as people would be able to instantly exchange between the two using Lightning. Charlie wrote:
While the growth of the Japanese exchange market and the rise in interest of institutional investors in bitcoin remain as major driving factors of bitcoin price, litecoin’s effect on the bitcoin price cannot be dismissed. Once scaling issues of Bitcoin are resolved, the community anticipates the bitcoin price to reach $2,000, a key psychological resistance level.