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Bursting onto the cryptocurrency scene in August 2017, Bitcoin Cash (BCH) quickly became a highly sought-after investment instrument, (at the time of writing, it is the third largest cryptocurrency by market cap). Bitcoin Cash was created as the result of a hard fork that took place on the Bitcoin blockchain network, which resulted in a split that lead to its creation. The BCH blockchain has a significantly larger block size limit than that of Bitcoin and it offers a faster processing time for Bitcoin Cash users. Bitcoin Cash also implements a new algorithm designed to speed up the mining process at times when the network is congested.
Cryptocurrency investors: As the cryptocurrency market continues to expand and take form, many investors are creating a crypto-based portfolio. Adding BCH to such a portfolio could contribute to its diversification.
Bitcoin investors: While both stemmed from the same network, Bitcoin Cash and Bitcoin are often in rivalry, with their respective prices usually moving in opposite directions. Therefore, Bitcoin traders could include BCH in their portfolio as a hedging tool.
Crypto enthusiasts: The cryptocurrency market is quite new, and much of its legal and regulatory status is still in the air. However, those who believe that its mainstream acceptance will continue to grow, could invest in cryptos such as BCH, hoping it will grow in value over time.
Day traders: Cryptocurrencies are highly volatile financial assets and could experience multi-percentage price swings over the course of a single day. BCH generally has a higher level of volatility than many other cryptocurrencies. Therefore, day traders could utilize this volatility to generate profits in the short-term.
Cryptocurrencies are highly unpredictable, and Bitcoin Cash is no exception. It operates in a highly volatile market that is exposed to many factors, both internal and external, which could affect BCH prices. Therefore, it is important to follow the BCH chart and recent news when trading and investing in Bitcoin Cash. Among the factors that could affect Bitcoin Cash prices are:
Bitcoin prices: As mentioned before, since there’s a rivalry of sorts between the two currencies, they could often move in opposite directions. However, it is important to remember that Bitcoin serves as a benchmark for all cryptocurrencies, and sometimes when the price goes up, other cryptocurrencies follow suit.
Infrastructure issues: Bitcoin Cash was created as a result of an upgrade to the Bitcoin blockchain, which resulted in a hard fork splitting the network into two currencies. Such events, alongside other significant occurrences (such as a soft fork, possible hack, latency problems etc.) could also have an effect on BCH prices.
Liquidity and availability: Most cryptocurrency exchanges do not offer all of the cryptocurrencies available. The more exchanges add BCH to their offering, the higher its liquidity and availability - both of which could affect its price.
Mainstream acceptance: Cryptocurrencies are still in the center of a major debate between mainstream financial institutions and retailers. If, for example, a major bank or retailer decides to support Bitcoin Cash transactions, that could have an impact on its price.
When compared to Bitcoin, Bitcoin Cash has a much larger block size. Blocks are segments of code of predetermined size which together create the blockchain. Since Bitcoin Cash’s maximum block size is 8 times larger than that of Bitcoin, it could potentially support a much larger network without creating latency and ensuring speedy processing times.
However, Bitcoin is still king of the cryptocurrencies and it is not far-fetched to believe its strong user base and widespread popularity will keep it at the top of the blockchain food chain for years to come. Nevertheless, Bitcoin Cash is extremely popular and its superior block size and scaling potential, coupled with a strong community of traders and investors, could help it keep its spot among the world’s top cryptocurrencies.
On August 1st, 2017, the Bitcoin Blockchain network underwent an event known as a hard fork. A hard fork occurs when an update is rolled out onto the blockchain code, making the network backwards incompatible. Since Bitcoin’s blockchain is decentralized, miners on the network must “signal” whether or not they accept the update. If enough miners “vote” in favor of the update, the hard fork is accepted and the entire network is upgraded. However, if there’s a reasonable group which rejects the update, the network splits into two parallel blockchains, resulting in two cryptocurrencies.
Such was the case with Bitcoin Cash, as a significant group of miners intentionally rolled out an update to split the network. Despite knowing that they will not be able to reach consensus to increase the block size to 8MB, they knew that they had enough support to create a new currency. Thus, Bitcoin Cash was created, bursting onto the scene to become the world’s 3rd-largest cryptocurrency at the time nearly overnight.
Bitcoin Cash is the largest cryptocurrency to be born out of a hard fork. Since its creators made it to be faster and more scalable than the original Bitcoin, it quickly gained traction and established itself as a multi-billion dollar currency (by market cap). However, despite its supposed advantages, it was still a long ways away from becoming the world’s top crypto. Bitcoin’s reputation, history and popularity kept it at the top of the list by a large margin.
Dethroning Bitcoin is not a declared mission for the creators of the BCH currency and it is safe to assume that they were content with the great success of its initial release. However, as cryptocurrencies grow increasingly popular and more miners, investors and traders join the cryptocurrency space, it is possible that the 8MB block will be a deciding factor later down the line.
*This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
*Cryptocurrencies can fluctuate widely in prices and are therefore not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. Your capital is at risk. Past performance is not an indication of future results.