How to Trade Bitcoin Cash

Why is Everyone Talking About Bitcoin Cash?

Bitcoin still dominates the cryptocurrency scene but there have been a series of high profile splits, or forks. Bitcoin Cash is a direct split from Bitcoin and is trying to define the direction of Bitcoin. Many view the emergence of Bitcoin Cash as a battle for the soul of Bitcoin.

Bitcoin Cash has proven to be deeply controversial and it has the potential to completely change the cryptocurrency market. In order to understand why, you need to understand the background to Bitcoin’s would be rival.

5 Incredible Bitcoin Cash Facts You Might Not Know

  1. Bitcoin Cash (BCH) is a cryptocurrency created from a hard fork of Bitcoin. The fork occurred at block 478,559
  2. Anyone who held and was in control of their Bitcoin private keys at the time of the fork automatically became a holder of the same amount of Bitcoin Cash on the new fork – various exchanges also honored this ‘airdrop’ to their customers.
  3. At launch, Bitcoin Cash immediately raised the block size limit from 1MB to 8MB as part of a massive on-chain scaling approach
  4. A Bitcoin Cash Visa debit card will be launched soon according to a tweet by Roger Ver on Dec 11th (see below)
  5. Bitcoin Cash enables virtually instant payments with low fees

Data from U.S. Equity Research estimates the cryptocurrency market is expected to grow at a 32% rate by 2023.

According to RnRMarketResearch:

“Growth is propelled by the benefits of compliance-free peer-to-peer transaction, cross-border remittance transfer, increase in use cases, volatility in the stock market, fluctuating monetary regulations in different countries, transparency, and immutability of the distributed ledger technology and benefits such as faster transaction and reduction in total ownership cost.

 

bitcoin cash visa debit card

Bitcoin Cash Visa Debit card, via Twitter @rogerkver

A Brief History of Bitcoin Cash

Bitcoin Cash is the result of a long-running argument between different factions of the Bitcoin community. The argument is about scalability. As Bitcoin has grown, the transaction speed of the network has become slower and slower. This is clearly visible on the graph below which shows the volume of transactions pending in the Bitcoin Core mempool.

Bitcoin vs Bitcoin cash chart comparison of the mempool

Bitcoin vs Bitcoin cash mempool comparison via Twitter @rogerkver

The number of transactions on the block-chain has increased exponentially as more people use the network. The size of each block has not grown with the number of users. This is called the scalability problem.

Over the years many traders and miners have argued for an increase in the blocksize to facilitate faster transactions. In August 2017, Bitcoin implemented the Segregated Witness (SegWit) solution. One of the biggest drags on transaction speed is the digital signature. This signature is designed to verify that the sender has the necessary funds to make a transaction.

SegWit is designed to resolve the scalability debate by stripping the signature from the input and moving it to the end of the transaction. In theory, this solution increases the 1MB limit of a block up to around 4MB.

Many users disagreed with this approach. They instead want to directly increase the blocksize from 1MB to 8MB. Their argument was based on the fact that a blocksize increase will be necessary down the line anyway, so why not bite the bullet and do it now?

This disagreement fractured the Bitcoin community and once SegWit was implemented it led to a section of the community adopting a hard fork from Bitcoin. This hard fork led to the birth of Bitcoin Cash (BCH). BHC’s proponents hope that the increased blocksize will allow Bitcoin Cash to process a significantly larger number of transactions, with a view towards competing with the likes of Visa and Paypal.

What is Bitcoin Cash?

Put simply, Bitcoin Cash is a hard fork from Bitcoin. It is designed to solve the scalability problem by directly increasing the blocksize on the chain. The fact that Bitcoin Cash is a hard fork is important. Once a cryptocurrency undergoes a hard fork there is no going back. There is no backwards compatibility and it forces users to choose which fork they want to continue transacting on.

According to their own website Bitcoin Cash is “peer-to-peer electronic cash for the Internet. It is fully decentralized, with no central bank and requires no trusted third parties to operate”. Bitcoin Cash’s main selling point is its ability to process transactions rapidly.

bitcoin cash vs bitcoin comparison

Bitcoin Cash vs Bitcoin via Twitter @rogerkver

In order to ensure transactions are always processed smoothly Bitcoin Cash operates a scalable mining difficulty. If there are fewer miners on the network the mining difficulty algorithm adjusts and becomes easier ensuring that transactions are still processed quickly.

Bitcoin Cash believe that they are following Satoshi’s vision for the future of Bitcoin. This is an assessment that has been met with some resistance from the cryptocurrency community.

How is Bitcoin Cash Made?

Bitcoin Cash is made in much the same way as Bitcoin. Unlike banks or Governments, which physically print currency, Bitcoin Cash is created digitally by its community.

The technology behind Bitcoin Cash is called a blockchain. It acts as a general ledger, recording every transaction ever made. In order to process these transactions users, or “miners” use their computers to process the transactions. These miners are then rewarded with Bitcoin Cash.

Bitcoin mining equipment _Asics

Bitcoin mining operation in North America Bitcoin.com

This has two purposes. Firstly, It acts an incentive for users to process the transactions on the blockchain. They are rewarded with BHC that they can then sell. Secondly, it controls the number of coins in circulation. The only way to create new coins is to “mine” them.

Over time the difficulty of mining coins is designed to increase steadily. This is to prevent the market becoming saturated. Eventually, Bitcoin Cash will a 21 million cap and no more coins will be produced. At this point, miners will instead be rewarded with a small cut of each transaction.

One interesting thing to note is that Bitcoin Cash operates on a scalable difficulty. This means that when fewer miners are operating remaining miners find it easier to mine BHC. This has encouraged some miners to adopt BHC as they can make more money but it also has the side effect of flooding the market with a large number of coins at once, thus pushing down the value of Bitcoin Cash.

Who Created Bitcoin Cash?

 

What Is The Price of Bitcoin Cash?

You can see the price of Bitcoin below:

What Drives the Price of Bitcoin Cash?

Bitcoin Cash is a very young cryptocurrency but it still follows many of the same rules as other cryptocurrencies. Its value has generally risen and fallen in line with the rest of the market. As with other all other cryptocurrencies, Bitcoin Cash is volatile. You should expect to see fairly dramatic fluctuations in value.

Like other cryptocurrencies, Bitcoin Cash is heavily influenced by media attention. As Bitcoin and other currencies hit the headlines, expect to see new traders pile in. This will inflate the value of cryptocurrencies across the board. Once it hits a peak then you will probably see a huge drop in value as savvy traders engage in profit-taking. You should keep an eye on the headlines when deciding how to invest in Bitcoin Cash.

Unlike other cryptocurrencies, Bitcoin Cash is in direct competition with Bitcoin itself. Bitcoin Cash is a hard fork of Bitcoin. Both cryptocurrencies are proposing their own solutions to the scalability problem. A key factor in Bitcoin Cash’s potential for success will be whether users decide that directly increasing the blocksize is more effective than SegWit.

The price of Bitcoin Cash has jumped previously when mining groups provided their support. As such, you should keep an eye out for any major mining groups or large traders declaring their support for Bitcoin Cash. If this happens then expect to see a spike in value as miners and traders pile in.

You also need to keep in mind that in the early stages, Bitcoin Cash will “take” from Bitcoin. Although Bitcoin Cash and Bitcoin are in direct competition for user attention, there is the potential for Bitcoin Cash to carve out its own niche in the cryptocurrency ecosystem. The reverse is also true. If traders decide they prefer Bitcoin then expect to see Bitcoin Cash languish at low values.

What is the Price Outlook for Bitcoin Cash and What do Experts Say on Prices?

Predicting the future of Bitcoin Cash presents a particular challenge. BHC is a hard fork from Bitcoin and its future rests in the hands of miners and traders. Miners will often adopt the coin that brings them the best value for money. Bitcoin Cash has seen miners switch over from Bitcoin when their difficulty was lowered. Furthermore, if users find more transactions to be beneficial then Bitcoin Cash will see wider take up. Especially if SegWit proves ineffective and a backlog of transactions begins to build upon the Bitcoin Network.

In the short term, Bitcoin Cash suffered a brief drop and then stabilized and now seems to be on a broad trend upwards. If the cryptocurrency can survive a full year then we would expect to see it continue on an upward trend. That being said, don’t expect to see your Bitcoin Cash investment reach the same value as Bitcoin any time soon.

Bitcoin Cash is a risky investment even by cryptocurrency standards. It is more suited to traders who want to include some as a hedge in case more miners decide they support Bitcoin Cash’s scaling solution. It is also a good choice for traders skeptical of SegWit or who support the ideological choices of Bitcoin Cash.

Bitcoin Cash has caused a great deal of controversy among the cryptocurrency community. The Hard Fork seems to have opened the floodgates as Bitcoin Gold soon followed (and promptly crashed). There are fears that more hard forks could destabilize the Bitcoin ecosystem.

Some experts are a little more bullish in face of the split. Anatoliy Knyazev, co-founder of Exante, believes that Bitcoin Cash is “decentralized governance in action”. In other words, it’s an attempt to allow the market to decide on a solution to the transaction time problem.

Many experts harbor serious concerns that increasing the size of blocks won’t resolve the scalability problem. Ryan Taylor, CEO of Dash Core, has argued that Bitcoin Cash doesn’t really do anything to solve the Bitcoin scaling issue and will eventually stagnate. This is the view shared by many exchanges, who haven’t adopted support for the Bitcoin fork.

While many insiders are skeptical of the long-term potential of Bitcoin Cash, there is a chance it could do well. Some believe that Bitcoin Cash’s future is entirely in the hand of miners. Aurelien Menant, founder, and CEO of the exchange Gatecoin believes that if miners decide they can make more money mining larger blocks, they will commit more hashpower to BCH. That being said, Menant cautioned that this will only happen if BCH can prove that its technology can match the features, security, and reliability of Bitcoin’s own software.

Should you Trade Bitcoin Cash?

Bitcoin Cash is an interesting trading opportunity because it could define the path Bitcoin will take. While Bitcoin is still by far the most popular choice Bitcoin Cash has survived the initial turmoil around its creation and has seen some popularity among miners.

While most altcoins compete with Bitcoin in one way or another Bitcoin Cash takes this to the next level. The very survival of BHC is predicated on traders and miners adopting it. If miners and traders chose to adopt Bitcoin Cash then it will likely be at the expense of Bitcoin.

This means that Bitcoin Cash could make an excellent long-term prospect. The price of entry is much, much lower than Bitcoin, so you can get more tokens for less money. Furthermore, if miners decide that SegWit isn’t a satisfactory solution to the scalability problem, Bitcoin Cash could see wider uptake.

That being said, focusing entirely on Bitcoin Cash would be a big risk. Instead, you should try to diversify across other cryptocurrencies such as Ripple, LiteCoin or even Bitcoin.

What is the Current Price of Bitcoin Cash?

You can see the price of Bitcoin Cash and other leading cryptocurrencies below:

 

 

 

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