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As Market Cap Adds $1 Billion In Just 24 Hours, Bitcoin Soars Above $1,700


As Market Cap Adds $1 Billion In Just 24 Hours, Bitcoin Soars Above $1,700
According to a price index by industry website Coindesk, the price of bitcoin rose above $1,700 Tuesday morning.
The risks that could scuttle its recent surge are being contemplated by analysis with the price so high.
In the recent weeks, there has been significant rallying in the digital currency. According to Coindesk figures, the price has increased by 43 percent over one month. From around $7.16 billion in May 2016 to $27.9 billion today, the market capitalization for bitcoin has increased massively over one year. According to the website's price index, its market capitalization has risen by over $1 billion in just the last 24 hours.
Cryptocurrency investors are also becoming more confident as the price rises. According to data from bitcoin exchange Bitfinex, from a low of 7,649 on April 29 to 15,279 on Tuesday, the number of "long" bitcoin positions held — where investors speculate that it will rise in price — has increased significantly. Short positions held have remained fairly consistent at around 17,000 over the same period.
And supporting the continuing rally are recent developments in bitcoin. A greater amount of bitcoin being bought with Japanese yen and a spike in popularity of b bitcoion happened after Japan's decision to legalize the currency as a payment method. According to Chris Burniske, a blockchain products lead analyst at fund manager ARK Invest, supply and demand dynamics are also having a large impact on the digital currency.
Bitcoin's annual rate of supply creation was halved last summer. In order to reduce the rate of supply every few years to prevent inflation, this was an automatic process, written into bitcoin's code when it was invented in 2008.
"This means half as much bitcoin is being minted in 2017 as in the first half of 2016," Burniske said.
"When that decreasing rate of supply expansion is coupled with ongoing growth in bitcoin being used as a means of exchange and store of value, either velocity must go up or the price must go up to accommodate the market dynamics."
But internal politics might be one of the biggest risks for bitcoin.  Debates about how to scale up the technology to allow more simultaneous transactions is being debated by bitcoin proponents over the past few months.
"While some progress has been made regarding the ongoing scaling debate, there are still strong interests that are diametrically opposed in how to proceed," said Burniske.
"On one side, a few influential Chinese miners want to increase bitcoin's block size to accommodate more transactions per block. On the other side, bitcoin's most influential software developers want to implement a software update called Segregated Witness to accommodate more transactions, among a host of other improvements to the protocol."
This divide could lead to a "fork" in the bitcoin blockchain, effectively creating two separate types of bitcoin as it threatens to split bitcoin proponents.
Charles Hayter, CEO and founder of price comparison site Crypto Compare warns that problems would be created by one result of such a split which would be to resolve the conflict by putting both ideas to the test.
"The issue with a split, and especially one for bitcoin, is the fallout in terms of publicity as it will gain no favors in the complexity and show of disunity," he said.
"This is why the issue or absolute impasse in negotiations has been skirted round at all costs. Although there are the more bellicose and fanatical elements in the equation — the general spirit is to move in a compromise that gives concessions to various parties and finds routes round various obstacles."