The Bitcoin (CRYPTO: BTC) price is down 7% over the past 24 hours, currently trading for US$61,344 (AU$84,030).
Crypto investors appeared to be driving the Bitcoin price higher ahead of and shortly following this weekend's Taproot upgrade, with the token trading for US$66,100 in the early hours of Monday.
But since then, the selling has taken hold.
And it's not just Bitcoin.
The Ethereum (CRYTPO: ETH) price has tumbled 8% since this time yesterday, according to data from CoinMarketCap.
With the Taproot upgrade expected to help Bitcoin challenge Ethereum's current dominance in the smart contract space, that could be leading to some crypto investors reconsider their holdings.
Image source: Getty Images
What is the Bitcoin Taproot upgrade?
This weekend's upgrade for the world's biggest crypto by market valuation was dubbed 'Taproot'. And it's the first upgrade for the digital token since 2017.
According to Jonathon Miller, managing director Australia of cryptocurrency exchange Kraken, "Taproot … marks a significant milestone for technical changes to the network, as well as sets the operational foundation for how future upgrades will be implemented to the Bitcoin protocol."
Crucially, Taproot enables Bitcoin to go head-to-head with Ethereum in enabling smart contracts.
Miller said:
The upgrade is set to improve the scalability of the Bitcoin network, improve transaction efficiency, and add the potential for smart contract capabilities. These enhancements are expected to be especially significant for the Lightning Network in supporting massive channels that were previously unfeasible.
Bitcoin will now have the capability for more complex transactions, including more seamless DeFi transactions, and will offer users greater privacy.
The upgrade improves Bitcoin's smart contract abilities by reducing the amount of space they require on the blockchain, cutting costs.
Fred Thiel, CEO of cryptocurrency mining specialist Marathon Digital Holdings, agrees that's the biggest value of this weekend's upgrade.
Thiel said (quoted by CNBC), "The most important thing for Taproot is…smart contracts. It's already the primary driver of innovation on the Ethereum network. Smart contracts essentially give you the opportunity to really build applications and businesses on the blockchain."
With Bitcoin's notorious price volatility in mind, the 7% 24-hour fall could be just a blip on its way to new highs. Or it could signal the early moves of a major move lower.
