The price of Bitcoin fell by 11% on Thursday to its lowest level in three weeks. The drop in price was caused by a report which suggests that double spending occurred on the blockchain.
Double spending occurs where someone spends money in a transaction twice, more than the number of times they should be able to. The blockchain was thought to have solved this issue when the Bitcoin white paper was published in 2009.
The suspected double spend transaction was initially thought to be an RBF transaction, which is when an unconfirmed Bitcoin transaction is replaced by a new transfer paying a higher fee. However, researchers later stated that no RBF transaction was detected.
“It appears as if a small double spend of around 0.00062063 BTC ($21) was detected.”
The report was rejected by many in the Bitcoin community who assert that the double-spend event did not occur but rather, two blocks were mined simultaneously which led to a chain reorganization. Such an event is much different from double-spending.
Despite the news, institutional investors still cannot get enough of Bitcoin and continue to invest in the cryptocurrency. The world’s largest asset manager, BlackRock, recently gave two of its funds the green light to invest in Bitcoin futures.
Documents filed with the U.S. Securities and Exchange Commission on Wednesday reveal that two of the trillion-dollar asset management company’s funds, BlackRock Global Allocation Fund Inc. and BlackRock Funds V are interested in Bitcoin, having considered the regulatory implications of it.
Thursday’s sell-off of Bitcoin wiped off most of its yearly gains, making the cryptocurrency only up by 6% for 2021. It is still early days. Institutional investors have not backed down despite the fall in price. With strong hands and a healthy appetite for risk informed by decades of decision making, it is likely that institutional investors will stay in the markets, providing the extra support needed to sustain the markets.
Photo by Chris Liverani on Unsplash