Bitcoin does not require a market crash or a crisis in governance.
No matter what, it's receiving both.
In the time since Bitcoin Core released v30, in October 2025, a philosophical disagreement has been building, and the network is simultaneously trying to find a bottom in this conflict.
At its current price of about $64,300, Bitcoin is selling at a 49% discount to its all-time high of $126,000 reached in October 2025 and below its falling 200-day moving average.
BIP-110 & Bitcoin's Chain-Split Showdown
The battle in question now has a hard due date of August 7, 2026, at block 961,632. What happens then may determine if Bitcoin starts its next cycle with one chain or two.
In December 2025, creator Dathon Ohm introduced BIP-110, known as the "Reduced Data Temporary Softfork."
It is a widely agreed-upon soft fork that will be in effect for a duration of one year.
This proposal focuses on data management, free from political considerations: for approximately one year, restrict OP_RETURN outputs to 83 bytes, establish a maximum size of 34 bytes for the majority of new output scripts, and implement limitations on several data-carrying techniques, including large data pushes, witness items, and certain unspecified witness versions.
No existing data on the blockchain will be lost; this applies solely to future developments.
Instructions in the manner of Ordinals and the broader domain of non-monetary data that has been using Bitcoin's blockspace since 2022 are the main points of contention.
Supporters of the idea argue that this takes Bitcoin away from its original purpose as a payment and settlement system, raises the costs of running a complete node, and broadens the set of UTXOs.
Things get controversial as you get into the process.
A seamless, market-driven lock-in process is ensured by BIP-110 through the use of bit-4 signaling, which requires a 55% consensus among miners over a 2,016-block difficulty cycle.
Since being live on December 1, 2025, signaling has maintained a consistently low percentage of hashrate, hovering about 0.3% to 0.4%.
The most recent monitoring shows a range as low as 0.00% to 0.86%. If a regular lock cannot be obtained, the proposal will switch to a mandatory route, which is a signaling period that must begin at block 961,632.
At this point in time, regardless of what the majority hashrate does, nodes using BIP-110-compatible software, mostly Bitcoin Knots, will begin to reject blocks that do not show support.
Critics claim that this strategy, which is based on the 2017 UASF playbook, elevates a seemingly insignificant conversation to the level of a major governance problem.
What the Numbers Say
At the moment, the entire network hashrate is running at around 940 EH/s. BIP-110 signaling is below 1%, at around 5 EH/s.
The bulk of the signaling blocks that are now accessible were produced by Ocean, who is associated with Jack Mallers and Adam Back.
It appears that the bulk of Bitcoin's security resource managers are either unconcerned or actively opposed to the idea. The consequences of BIP-110 in the event that the market falls short of the 55% target highlight the importance of that gap.
When a minority of nodes enforces a rule that the vast majority of economic and mining nodes reject, it does not get rid of the rule so much as it creates two sets of legitimate blocks.
Both chains nevertheless acknowledge as valid blocks those that follow the stricter rules of BIP-110. While other environments may allow blocks that do not fulfill the requirements, BIP-110 nodes reject them.
The fact that BCH is trading at a small fraction of BTC's price right now is the best evidence we have for how markets assess a split without sufficient hashrate support.
Who's Lined Up Where
As the deadline approaches, the opposition has become stronger, not weaker.
Michael Saylor argues that the Bitcoin consensus layer shouldn't be involved in determining the "purpose" of fee-related transactions in his lengthy critique titled "110 Reasons Why BIP-110 Is a Bad Idea," which was published on July 18.
He cares more about the structure than the acceptability of spam.
It is his contention that the precedent becomes permanent and may be used by individuals with control over future rule revisions the moment consensus rules start to distinguish between "acceptable" and "unacceptable" legitimate transactions.
He has also brought out the fact that BIP-110 restricts potential future upgrade choices, such as contracting approaches like BitVM that depend on the data flexibility that the proposal would limit.
The activation settings in question are dangerous, as pointed out by Adam Back and Jameson Lopp, who make similar but separate points.
The most successful Bitcoin upgrades, such as SegWit and Taproot, previously received more than 90% support before they were finished.
Therefore, a threshold of 55% is rather low for a soft fork.
According to them, the system's goal is to prevent disagreement, not consensus, and implementing a mandatory signaling technique with less than 1% natural backing will ensure just that.
A number of people are staying neutral.
"I don't know enough about the system to know the consequences of either path" was Jimmy Song's public statement, which drew strong criticism.
This shows that in a contentious discussion, being neutral is seen as an attempt to avoid taking a stand.
Knots developers and BIP-110 advocates, on the other hand, bring up Core v30's October 2025 release, which over 1,200 times raised the default relay policy for OP_RETURN from 83 bytes to about 100,000 bytes.
Claiming that filtering fails to prevent spam due to data being incorporated indistinguishably inside common transaction outputs, such as hashes, Core framed it as a modification to the relay policy instead of a consensus change.
Technically speaking, that's a valid point; it's practically impossible to entirely disable arbitrary data storage at the relay layer.
That's why BIP-110's critics say it's a band-aid solution with mixed results: it won't fix the underlying problem, but it might break the chain while trying to fix it.
After Core made the v30 update without asking for community permission, it sparked the Knots movement and, a few months later, prompted the formation of BIP-110, a counterproposal.
Second Pressure Point: Sztorc's eCash Fork
In August, new concerns arose beyond BIP-110. In the same era as BIP-110, Paul Sztorc—the brains behind the Drivechain proposal (BIP 300/301)—has also announced intentions for an unrelated hard fork, with the target being block 964,000.
The plan calls for a new SHA-256d chain to be created, which will at first be identical to Bitcoin Core.
When it launches, the difficulty will be adjusted, and at the fork block, all BTC holders will be given an equal amount of the new asset.
Drivechains, a feature that has been postponed on Bitcoin's mainchain schedule for a number of years, is the focus of this endeavor, which, unlike BIP-110, does not impose data limits but rather prioritizes scaling and sidechain development.
Even though the two occurrences have separate causes, they have a multiplicative effect on one another.
With a 1:1 airdrop, all parties involved—exchanges, custodians, wallet providers, and institutional holders—are compelled to decide whether or not to support BIP-110 around the start of the required signaling window.
It's just a happenstance that happens to increase operating noise throughout the entire ecosystem over a three-week period; it's not coordinated at all.
Market Implications
As a result of its October 2025 top, Bitcoin is presently investigating a technical bottom-formation story.
Even while some corporate purchasers took advantage of the downturn to amass assets, BlackRock's IBIT recorded considerable outflows in June.
The market is already analyzing macro repricing when a governance conflict with clear chain-split tail risk develops, rather than at fresh peaks when it may be readily dismissed.
Prediction markets have failed to treat BIP-110 as a distinct, highly liquid binary event.
It appears that traders are quite confident that Bitcoin will remain in the low-to high-50,000s area as we enter August, according to linked Polymarket BTC-price ladders for mid-to-late July.
This suggests that a disorderly split is not the most probable outcome according to the market at the moment.
That lines up with the hashrate calculations: if less than 1% of nodes alert three weeks in advance, then BIP-110 probably won't lock in via the clean channel.
The immediate question is whether nodes that are aligned with Knots will continue with the forced-signaling strategy after a failure has been confirmed.
Ultimately, this decision is not decided by market forces but rather by a small group of maintainers.
If this happens, the market is likely to react in a predictable way: the original chain, which has the support of the majority of miners and exchanges, would likely become the focal point of liquidity, hashrate, and price discovery.
"The market eventually resolves the issue" and "the market resolves the issue without incurring costs" are two different claims.
There are a lot of temporary problems that can arise from chain splits, such as replay attacks, confusion with exchange listings, uncertainty with custody, and a risk premium that shows up as bigger spreads and smaller order books, which is particularly problematic when confidence is already low.
August 7 offers a difficult assessment of the asset's claim that it has progressed past the governance problems of 2017 exactly.