Bitcoin Cash value climbs as Bitcoin takes a tumble amid uncertain future
Bitcoin Cash, which forked from the Bitcoin Blockchain in August, has seen a 40% increase in value in the same period.
The surprising shift in value, especially as Bitcoin was sat at an all-time high of over $7,000 per bitcoin, can be attributed to the failure of Bitcoin2X. As the new hard fork fell apart and uncertainty was thrown over Bitcoin’s future, it appears many users have jumped ship to Bitcoin Cash with hopes it can be a viable alternative.
The allure of Bitcoin Cash over Bitcoin is that it’s capable of handling larger transactions per block than Bitcoin. If Bitcoin2X had come to pass, it would have been able to tackle even larger transactions and thus bring down the inflated price of Bitcoin. Without Bitcoin2X going forward, all those who want to enable larger transactions and lower fees made the move to Bitcoin Cash, effectively legitimising its soft fork from the Bitcoin Blockchain in the process.
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The rising cost of Bitcoin has been attributed to the increased costs and slower speed of transactions on the service since its rise in popularity. Your average transaction could easily take upwards of 10 minutes to be processed and due to block limits, only a set size of transaction is possible, meaning many exchanges will now charge a fee of around $5 on each transaction. As you can imagine, that’s not an incredibly popular situation to be in.
Bitcoin2X was intended to relieve this situation by doubling the block size to 2MB. However, as Bitcoin users couldn’t come to an agreement, it all fell apart. This left any Bitcoin users who wanted change to move to Bitcoin Cash which benefits from increased speed and transaction size due to utilising technology called SegWit.
Bitcoin’s future has certainly been called into question by the collapse of Bitcoin2X and the rise of Bitcoin Cash, but it’s still too early to declare Bitcoin dead. This may be the biggest flux in the cryptocurrency’s history, but it’s likely to weather the storm and come out stable due to its inherent popularity as a cryptocurrency. Meanwhile, Bitcoin Cash could become a valuable asset for those who really want to move money around using digital currencies.
To understand more about what Bitcoin Cash is, and its relationship to Bitcoin, read our brief explainer below.
What is Bitcoin Cash?
The breakaway version of the cryptocurrency was set up by a group that runs the software behind bitcoin using a process known as a ‘fork’.
There were early concerns that the introduction of Bitcoin Cash would have a detrimental effect on the price of the original but the opposite has happened. Over its launch weekend, Bitcoin surged above $3,000 to reach a new all-time high. It peaked Saturday at $3,360.87 before dropping slightly to $3,286.87. This gave Bitcoin a market cap of $53.4 billion.
Rival digital currency Ethereum similarly saw surging prices over Bitcoin Cash’s launch weekend, jumping 12% on Saturday and a further 7% on Sunday, to $270.07.
By comparison, despite Bitcoin Cash’s early rise, the new currency plunged to below $300 on Friday (down from $727).
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The split was a result of unrest in a section of the digital currency community. Members were unhappy about the 1MB block size limit slowing transactions, leading to infuriating delays. Bitcoin Cash added a number of new features, including a block size limit increase to 8MB and a new way of signing transactions, to solve this frustration.
As a result, Bitcoin’s blockchain – the digital ledger that records all transactions – was forced to split into two different chains meaning everyone who held bitcoins before the split were eligible to receive the same amount of Bitcoin Cash tokens. This is at least partially responsible for the initial Bitcoin Cash spike.
“There’s no infrastructure available out of the box, to support BCC [Bitcoin Cash],” Fran Strajnar, co-founder and CEO of data and research company Brave New Coin told CNBC. “The network needs further support and infrastructure needs to be as easy as Bitcoin; otherwise it’s over for BCC.”
Coinbase, the world’s biggest bitcoin exchange, initially said it was not supporting Bitcoin Cash but later backtracked. It told customers via email that it would introduce “support” for Bitcoin Cash by 1 January but would not commit to whether it would trade the cryptocurrency. Until support rolls out widely, people who maintain a wallet on Coinbase will be unable to access their new alt coin cash. Inevitably, Coinbase users are angry with the decision, which could lead to legal woes for the company, despite the change in stance.
Like most things in the cryptocurrency world, no-one really knows what’s going to happen with Bitcoin Cash in future, but many believe that users will sell their new digital currency as soon as they can.