Bitcoin Cash Trading: How to Get Your Hands on This Hard Fork of Bitcoin

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Bitcoin Cash (BCH) is a hard fork of Bitcoin and can be purchased or traded in the same way as other cryptocurrencies. This includes buying the actual cryptocurrency on an exchange or via an online broker.

In this article, you’ll learn some of the basics of trading Bitcoin Cash. It also explores factors to consider before making a purchase or placing a trade. But if you’re in a hurry to get started, you can skip straight to our crypto brokers list .

Reasons You Might Trade Bitcoin Cash

Like any opportunity, there are pros and cons to trading Bitcoin Cash. Here are some reasons to consider gaining exposure to the price of this cryptocurrency.

Low transaction fees

The Bitcoin Cash blockchain operates with much larger blocks than Bitcoin. This means that more transactions can fit into each block, while on the original Bitcoin blockchain, block space is restricted and more scarce.

As a result, there is much less competition for users to get a transaction into the next block so there’s no need to outbid each other with higher fees. While Bitcoin transaction fees are now counted in dollars, Bitcoin Cash fees rarely cost more than 20 cents.

Rapid growth

Bitcoin Cash was forked from the most widely known cryptocurrency – Bitcoin. Everyone that held a Bitcoin balance at the time of the fork was automatically credited with the equivalent Bitcoin Cash balance.

The fork was widely publicized and many prominent exchanges offered instant trading in Bitcoin Cash, something that takes months and sometimes years for new altcoins to achieve.

Furthermore, many high-profile Bitcoin personalities endorsed Bitcoin Cash at its inception – names such as early Bitcoin evangelist, Roger Ver, and Gavin Andreesen, an early Bitcoin core developer that was entrusted the Bitcoin protocol development by Satoshi Nakamoto himself.

All these factors have seen Bitcoin Cash grow rapidly as can be seen by its trade volumes and total market capitalization.

High transaction capacity

Having a larger block-size than Bitcoin also means that the Bitcoin Cash blockchain is capable of a higher transaction throughput per second.

While Bitcoin can perform around 3 transactions per second, at full capacity it is estimated that the Bitcoin Cash blockchain can perform as many as 24 transactions per second.

The Bitcoin Cash developers are also testing Gigabyte Blocks as it is in their roadmap to be able to compete with traditional payment systems such as the VISA network.

On-chain scaling

The proponents of Bitcoin Cash favor scaling the protocol on the base layer which they believe is the most secure layer to do so.

This is as opposed to Bitcoin proponents that believe that the base layer should be optimized to be as secure as possible and that scaling should happen on higher layers of the protocol that have yet to be developed.

Since the fork, Bitcoin Cash has shown that the protocol is scalable ‘on-chain’.

How to Buy Bitcoin Cash

Actually acquiring BCH can be a bit of a challenge. When deciding how to get Bitcoin Cash most people will immediately go to an exchange. This generally involves exchanging fiat money for Bitcoin that you can then trade into Bitcoin Cash.

LocalBitcoins

If you want to get Bitcoin quickly and anonymously your best choice is probably LocalBitcoins. This exchange lets you buy Bitcoin in your local currency and is available all over the world.

Unlike many exchanges, it is possible to transact with LocalBitcoins without providing your ID. Unfortunately, this does expose you to scammers. However, if you take steps to protect yourself from scams then LocalBitcoins is easy to use and their low fee of 1% makes it a good choice to buy Bitcoins.

Coinbase

If you are willing to hand over your ID another choice is Coinbase. They offer an exchange, a wallet, and a user-friendly interface.

You can buy Bitcoin with Coinbase using your credit/debit card or a bank account. The fees are competitive with 3.99% for a credit/debit card and 1.49% for most kinds of bank transfers.

With Coinbase, there is less risk of being burned by a bad trade. This safety comes in exchange for your anonymity so Coinbase is unsuitable for privacy-concerned traders.

Managing Your Bitcoin Cash

Managing your own Bitcoin can be a challenge for the following reasons:

  • You might fall prey to a phishing scam and have your coins stolen.
  • You could misplace your access codes and leave your coins forever trapped in a wallet you cannot access.
  • If you use a wallet on your smartphone, your Bitcoins could be gone if your phone was stolen.

There are also risks completely outside of your control. You are reliant on the competence of your exchange and sometimes things can go horribly wrong. Nothing demonstrates this better than MtGox.

In 2013, MtGox, the largest Bitcoin Exchange, was hit by a series of hacks that resulted in the loss of over $500 million Bitcoins. Many MtGox users lost everything.

Even very reputable brokers like Coinbase are not immune to controversy, a number of accounts were hacked in 2014 as attackers abused the API of the Coinbase app in order to steal Bitcoins.

There have also been cases where users of Kraken and Coinbase have complained that their accounts have been frozen unfairly. Although these sorts of cases are difficult to verify.

Where to Trade Bitcoin Cash

If you want to avoid cryptocurrency exchanges, one option is to trade Contracts for Difference (CFDs) using a regulated online broker.

CFDs have a number of advantages. Instead of directly buying BCH you are buying a CFD with a short or buy position. If the market moves in line with your position then the broker will pay you the difference. If you pick the wrong position then you pay the broker the difference.

IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.

There are a few things you should look for in a broker. Most importantly, make sure that you use a regulated broker. These brokers must comply with high ethical standards designed to protect you and your investment.

You should also look at any commissions, overnight fees, and any extra tools that the broker provides. Brokers usually offer free demo accounts on their online platforms, allowing you to test the software before committing to any one platform.

Online Crypto Brokers in

Here is a list of regulated brokers available in that offer CFDs and other trading products on cryptocurrencies such as Bitcoin Cash.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 73.90%-89.00% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Potential Risks of Trading Bitcoin Cash

Compromises Made on Decentralization

While the developers and proponents of Bitcoin cash have focused on transaction throughput and on-chain scaling, they seem to be less concerned about the peer-to-peer aspect of the protocol.

As a result, Bitcoin Cash has fewer miners and fewer network nodes. Many believe that this poses a weakness to Bitcoin Cash that exposes it to be compromised or co-opted by special interests such as nation-states that may apply pressure for more identity to be attached to payments

Small Development Team

The Bitcoin Cash development team is much smaller and has much less experience in terms of developing the Bitcoin protocol. As such, they are poised to be outcompeted by developments on Bitcoin such as second-layer technologies like the Lightning Network, privacy enhancements, and sidechains.

This lack of development depth may also leave Bitcoin Cash more exposed if the network comes under attack or if one of its parameters fails.

Second Layer Technologies

Developers on other prominent blockchains such as Bitcoin and Ethereum are looking to achieve higher network scale by developing technologies that operate on second layer protocols, which is also referred to as off-chain scaling.

If successfully deployed, some of these second-layer technologies can compete directly with Bitcoin Cash’s strengths such as cheap transactions and higher transaction throughput.

Exchanges Aren’t Always Safe

Acquiring Bitcoin Cash through cryptocurrency exchanges carries some risks.

To begin with, you have slightly more obvious dangers. You might get scammed by an unscrupulous user on an exchange like LocalBitcoins. This is a peer-to-peer exchange where traders occasionally meet in person to make deals and you are able to deposit funds by bank transfers.

Unfortunately, LocalBitcoins comes with certain risks. Less than honest individuals have been known to target new traders and attempt to trick them out of their hard-earned cash.

Expert Opinions on Bitcoin Cash

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 - Gatecoin Exchange
Aurelien Menant CEO of Gatecoin Exchange interviewed by Jumpstart magazine Hong Kong

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.

Over the longer term, Bcash’s prospects are limited due to the relatively small size of the community maintaining its blockchain, developing its software and using the cryptocurrency, Aurelien Menant, founder and CEO of cryptocurrency exchange Gatecoin, told CNBC by email.

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