Against major market sentiments, bitcoin is on the rise again. Many investors had been expecting the cryptocoin to start depreciating following the activation of the bitcoin cash hard fork on the first of August, but now things seem to be going in the other direction. Why is it so?
Bitcoin has come a long way and it seems nothing will stop its shine, not even the infighting in the bitcoin community or the bitcoin cash hard fork.
This infighting, termed a "civil war" in some instances, was caused by bitcoin's increasing popularity, which made transactions on its network to become slower and more expensive. The solution, Segwit2x, which was grudgingly agreed on by both sides of the warring community was recently implemented and we thought the worst was over until a small group of miners indicated otherwise.
These miners, with grim faces and zero smiles (I suppose), said they'll start mining new coins on the network starting from August 1, a decision which split the blockchain and gave birth to Bitcoin Cash (BCC or BCH, we'll see which one sticks in the near future, if there is a future).
Bitcoin cash is 8 times bigger than bitcoin itself, which will make transactions much faster and less expensive on its network. Apart from this, there is uncertainty about the Segwit2x deal, if it will eventually fall through or not. So, they rolled out their contingency plan, which is bitcoin cash.
This announcement caused bitcoin to depreciate just a bit, falling below $2,700. And when bitcoin cash came around on August 1st, we thought it would immediately provide a tough competition for bitcoin. This is because everyone was given a token of bitcoin cash equal to the number of bitcoins they have before the fork. This "free bitcoin cash money", was expected to weaken bitcoin's price because many people will quickly sell it and the gains would somehow be extracted from bitcoin's value. However, things haven't been so, thus far. Bitcoin has been stable to some extent, and now seems to be rising again, rising above $2,800 with perceptions it could hit a new high in the coming week. Why is this so?
Growing confidence in bitcoin
The main reason bitcoin is weathering the storm is the confidence of the market, investors, and traders in its ability to handle the hard fork and scale accordingly with Segwit2x. As a result, there is optimism about the short-trend in bitcoin's price despite the bitcoin cash hard fork.
Perhaps, one major event which boosted investors' confidence, is CBOE's partnership with Gemini. CBOE is one of the largest options exchange in the U.S. Apart from joining forces with Gemini, it said it will integrate bitcoin futures in its services with options to target institutional and retail investors.
With CBOE's integration of bitcoin, tens of millions of accredited investors will be exposed to the world of bitcon and cryptocurrencies, which is a very good thing for the bitcoin market.
Bitcoin cash's volatility
As expected, bitcoin cash has been very volatile since it arrived. Twenty-four hours after its arrival it was worth almost $700. Since then, it has declined. At the moment it is worth a little below $300. And in-between this time it experienced enough ups and downs.
The general sentiment is that it will fizzle out soon and will be worthless.
There is little support for bitcoin cash, so it's not hurting bitcoin
On the mining side, a majority of miners don't support bitcoin cash. As a result, little resources are dedicated to mining bitcoin cash.
The only vocal supporter for bitcoin cash is viaBTC, who controls just 4% of bitcoin's mining power. The biggest player in the mining industry, Antpool, is sitting on the fence. Other big players aren't interested and most of them don't support bitcoin cash.
Because of the little support, bitcoin cash's birth was delayed by hours. There was little power dedicated to mining the altcoin and out of the blocks mined in the first 48 hours, only one was bigger than 1MB. Not impressive at all.
Bitcoin cash is not that easy to get, and sell
Many investors are yet to claim their bitcoin cash, and with the way things are going many may not bother to claim it at all.
Apart from its falling price, some wallets don't offer support bitcoin cash. Coinbase, who arguably holds 10% of the total bitcoins in circulation is not supporting bitcoin cash at the moment, and many people have their coins with them.
Also, complications may arise in the process of claiming bitcoin cash and one could lose their original bitcoins in the process. Many people are treading with caution, especially as bitcoin cash wallet tech is still in an infancy stage.
And after claiming your bitcoin, you may not exchange it easily for fiat or other coins as many exchanges don't offer markets for it. Currently, only 3 exchanges have markets for it (bittrex, HitBTC and viaBTC), and trading them may take a while.
Nevertheless, nothing is certain or fixed in the world of cryptocurrencies. Bitcoin could hit a snag and bitcoin cash could make a comeback and give it that competition many people had been expecting. The next week promises to be exciting.