What is Bitcoin Cash?
Bitcoin Cash (BCH) is a cryptocurrency which was “forked” from the original Bitcoin in 2017. While Bitcoin itself is often referred to as digital gold and primarily acts as a “store of value,” Bitcoin Cash is intended to be a medium of exchange and more like a digital form of cash. It is more scalable, meaning it is better suited than Bitcoin to be used for small everyday payments.
Despite the fact Bitcoin Cash itself has already split into two, it remains the sixth most valuable cryptocurrency as of March 2019. Anyone wanting to take cryptocurrency trading seriously should be keeping an eye on Bitcoin Cash.
A Short History of Bitcoin Cash
Bitcoin Cash came about as a result of a disagreement within the original Bitcoin (BTC) developer community over the way forward in 2017.
Cryptocurrencies like BTC and BCH are mined in blocks of transactions. These blocks take about 10 minutes to process, with the number of transactions per blocks being limited by the size of the block. In 2017, the growing number of transactions on the BTC network led to congestion, slow transaction speeds and rising costs for users.
The majority of developers were in favour of maintaining the block size and looking at other methods to improve transaction speeds. However, a small number of developers were in favour of increasing the block size and decided to clone the BTC network, thereby starting a new network they could modify.
Thus, Bitcoin Cash was formed with the goal of creating a cryptocurrency that could eventually replace traditional currencies as a means of making payments small and large.
Bitcoin Cash Vs Bitcoin
The main difference between BCH and BTC is that BCH has a larger block size, meaning that more transactions can be processed every 10 minutes. While Bitcoin still has a block size of 1mb, Bitcoin Cash is 32 times larger. This also reduces transaction fees, making smaller payments viable.
BTC is regarded as digital gold – a good store of value, but it’s not practical for making day-to-day payments. BCH, on the other hand, is better suited to eventually replace traditional currencies as a medium of exchange in the economy.
Apart from block size and some other minor differences, Bitcoin Cash is still very similar to Bitcoin. Like Bitcoin, the maximum number of coins will never exceed 21 million, and the number currently in circulation is similar. Bitcoin Cash is also supported by most exchanges and offers plenty of liquidity to active traders.
However, to date, the adoption of Bitcoin Cash has been slow. This does not imply in any way that it is doomed, it just means investors need to be cautious and not make assumptions about its long-term success. If it does experience widespread adoption, the increased demand will inevitably drive the price higher.
Regardless of the long-term outlook, market volatility and changing sentiment create frequent trading opportunities for those prepared to keep up to date with the market.
Trading and Investing in Bitcoin Cash
By now you are probably wondering how to buy and sell Bitcoin Cash. Before you dive in, it’s important to decide whether you are investing or trading. Investors invest based on value, while traders focus on short term price movements. If you believe in the long-term opportunity and believe the value will increase over time – then you are investing – but you may need to ride out some price volatility along the way.
If you are keen to take advantage of news flow, volatility, and changing market sentiment, then you are trading. This requires staying up to date with market developments and being prepared to lock in profits or cut losing trades quickly.
What affects the price of Bitcoin Cash?
The price of Bitcoin Cash rises and falls depending on news about its adoption in the broader economy, technical developments, and success and failures of its competitors.
Any news about large companies beginning to accept Bitcoin Cash should be positive for the price. However, if adoption takes longer than expected, investors may lose patience causing the price to fall.
The Bitcoin Cash community has already been involved in two contentious debates that led to the community splitting in two. Any signs of another split could be disastrous for BCH.
The other major factor to watch is the progress being made by Bitcoin Cash’s competitors. These are the other projects aiming to make their cryptocurrencies the default digital coin used for payments. Bitcoin Cash SV (BCHSV), which split from BCH in late 2018, and Litecoin are the largest of these, though Bitcoin Cash seems to be way ahead at the moment.