The author has made the explicit decision to refer to Bitcoin cash’s ticker name as BCH due to the fact that Bitconnect already has the BCC title.
Is all the confusion around the new Bitcoin fork hurting your head? Looking for some guidance on how this whole saga is going to pan out? Is Bitcoin cash going to go “to the moon”? Well, this piece might just make you more confused, because there’s a lot more than meets the eye when it comes to Bitcoin cash’s price spike.
If you had listened to the vocal crypto intellectuals on the Twitter feed leading up to the August 1 split – Bitcoin cash was dead in the water. Everyone was selling BCH-futures for 0.1-0.15 BTC. Naturally, this was the highest price this false impostor fueled by crypto-advocates-gone-corporate was ever going to reach. It was absolutely ridiculous to even consider that people were actually spending their own bitcoins to purchase even more Bitcoin cash!
Bitcoin cash shoots up in price
At the time of writing, a full day after the fork, Bitcoin cash has seen a near 200% increase on average, peaking as high as ~$1000 in certain exchanges like YoBit. Coinmarketcap are listing BCH as the 3rd largest cryptocurrency, coming in at a whopping $8 billion USD at the time of this post.
Screenshot captured at ~17h00 UTC.
Today, the Twitterati are still singing a similar tune, but there’s a subtle difference – the atmosphere in the air has turned from that of condescending dismissal to something closer to a tense stand-off. There are still whimsical tweets of “got out at $400, no regrets” going around, but they speak an underlying message: BCH is getting more traction than expected.
What’s really going on?
Taking a step back and looking at the big picture, the crypto intellectuals of Twitter might not be entirely incorrect in their assessment. There’s a lot more than meets the eye to BCH’s near 200% increase in the value. Here’s a short list of what might be artificially (at least more-so than normal speculation) increasing Bitcoin cash’s price:
- Ferdous Bhai, founder of 21MIL said a supply shortage of BCH on exchanges is contributing to the price spike as supply is failing to meet demand from the hype, as the blocks are coming in so slowly. The most recent block took 9+ hours.
An unknown mining pool based out of a hostel in Hong Kong, called MC pool, has mined the most BCH blocks to date. The MC Pool owner stated that they began mining the BCH blocks “for fun” and to promote the trading center that they had just created. The majority of miners in the pool have already switched back to BTC after their successful publicity stunt. This is due to the fact that both coins have equivalent difficulties to mine, and the return on BCH was too poor.
The take-away is that no large-scale operation is getting the BCH blocks out to the level expected – and that’s a shortage that could cause an artificial price spike. More on this on point #3.
Screenshot captured at ~17h00 UTC.
- There are ongoing arguments that Bitcoin cash is almost entirely illiquid
This would invalidate both the market cap listing Bitcoin cash at the third largest cryptocurrency in the world, as well as its current price point. The bitcoin maximalists stand strong on this argument. Check out this Twitter exchange for reference of both conflicting views:
Screenshot captured at ~17h00 UTC
The reality of the matter is that if no blocks are being mined, then no real amounts of BCH can be deposited on exchanges to be sold. The price discrepancy between the exchanges that are dealing with Bitcoin cash is evidence of illiquidity in contrast to the market volume figures provided.
Once we start seeing a regular flow of BCH blocks coming in and people can actually sell their Bitcoin cash, we may see a sharp downward spiral as supply overwhelms demand – especially if it all starts flowing in like a dam breaking which could be the case with this huge build-up of eager sellers. The crypto market is no stranger to ~200% upwards price spikes in a day, similarly, it can welcome an even greater price fall.
Popular Twitter “crypto-troll” WhalePanda likens BCH to known Ponzi scheme OneCoin
- Bitcoin cash is being bought out by the big players with a vested stake in the matter.
“Bitcoin cash is unprofitable to mine at the moment. From a game theory perspective, any rational miner would not expend their resources to mine BCH. This makes the problem of slow blocks even worse until the next readjustment. Consequently, it only makes sense that the group of people spearheading the project should be buying Bitcoin cash to inflate the price. If the price goes up enough, the hashrate will inevitably follow and the project can be saved.”
It’s a possibility this initial push doesn’t work out and BCH doesn’t get the hashing power it needs to be sustainable over the long-term. If this is the case, it could have catastrophic consequences for buyers who are putting more money into BCH hoping its going to moon.
So am I going to make millions or what?
As with anything trading related – no one really knows.
You’ve gotten the executive summary of the Twitterati crew. What happens next is up to the conglomeration of thousands of variables, mostly unknown and unpredictable moving forward.
Some unsubstantiated input from me: I think the BCH trend is following the image below (click to enlarge). While the juxtaposition of the Bitfinex chart implies that we are currently at the peak of Bitcoin cash’s value before we see a huge decrease, remember hindsight and perspective is everything. This could be a smidge of a dip in the long-term run of Bitcoin cash, or it could be the cup handle before its inevitable downfall (much to the joy of the Bitcoin maximalists I’m sure).
Featured image by David Zvonaf from Unsplash