What the fork is with Bitcoin?
By Arnaud Masset
Bitcoin is liable to stutter short term, due to uncertainty over its fork and profit-taking by existing investors. The leading cybercurrency flash crashed yesterday at around 18:00 London time, right after Bitgo CEO Mike Belshe declared he will not support the proposed Segwit2x fork. Belshe’s letter was co-signed by other ‘digital wallet’ and blockchain players: Wences Casares (CEO Xapo), Jihan Wu (Bitmain), Jeff Garzik (Bloq), Peter Smith (CEO Blockchain) and Erik Voorhees (CEO Shapeshift). Belshe’s letter explains that the initial purpose of SegWit2x was to boost Bitcoin’s scalability and to reduce fees. Good, he agrees, except the fork should not be permanent. The letter torpedoed Bitcoin prices, which fell 13% in two hours, finally stabilizing at around US$7,300 yesterday evening.
A fork is a change to Bitcoin’s software that creates two separate versions of the blockchain with a shared history. Forks can be temporary or permanent, meaning that Bitcoin could be split into two currencies.
Rumours persist that a small group of Bitcoin miners will carry out the fork anyway. This will cause more volatility in the meantime. Plus there will be downward pressure from alt-coins investors taking profits and reallocating their portfolios.
Mexico’s overnight rate to stay on hold
By Yann Quelenn
The Mexican central bank will likely keep its overnight interest rate at 7%, rather than raising it. Inflation expectations are down, and with the US Federal Reserve not tightening in November, there is no rush for Banxico to act.
Monitoring continues of the interest rate differential of US and Mexico to avoid capital outflows. A narrow differential is not advantageous for Mexico, but now the spread is so large that investors prefer the peso. The MXN is overvalued now. It has strengthened from 22 to 16 MXN per USD, which dampened inflation. When the Fed hikes its rates in December, Banxico will likely reduce its overnight rate and send the MXN lower.