The Bitcoin fork produced Bitcoin Cash – magical money made out of thin air.
There is a word for money made out of thin air and wishes – Leprechaun gold. After the blockchain forked on 01 August, there could be another word to describe the sudden appearance of wealth out of nothing – Bitcoin Cash – except in this case it was created by the gods of technology not Irish lore.
This new cryptocurrency has come about thanks to the aforementioned hard fork which, in itself, came about thanks to some Bitcoin infighting. This was further impacted by the timing of the fork – it was set to take place when the Bitcoin Improvement Proposal kicked in and activated Segregation Witness. Segregation Witness is a complex concept, but has been wonderfully simplified by TechCrunch who described it as ‘a change in its [Bitcoin’s] code called BIP 148…something that will help Bitcoin core scale going forward.’
While the terminology and technology that defines the fork and the BIP are lengthy and often incomprehensible, the important facts to take out are – there is a new cryptocurrency with Bitcoin’s shared history, and Bitcoin remains the market leader with a volatile, but steady rate of climb.
It was an ideological difference that saw a rebel group kick off with Bitcoin Cash on 01 August as one group felt very differently about the future of Bitcoin than the other. A similar situation happened with Ethereum in 2016 where that successful cryptocurrency forked into Ethereum Classic. What’s really interesting here is that those who own Bitcoin will have automatically received the equivalent in Bitcoin Cash, unless they were hosting with exchanges that refused to support the fork. Well-known exchanges such as Coinbase and Bitmex announced that Bitcoin Cash would not be supported on their platform leading many to move away to other companies in order to benefit from the split.
The split itself was closely monitored by the market with Coindesk live blogging the event and the tension that mounted around the arrival of the first block. For a while there was concern that Bitcoin Cash would fail before it began, but soon the blocks were coming out and the price started rising.
And it is really the price tag that’s causing consternation. Essentially, Bitcoin Cash can’t be easily traded or cashed in as yet so the inflated price feels artificial. Currently the new currency is trading at $445.55 (updated pricing can be found here), but those who own the new coin are stuck until the exchanges open before they can sell off their ‘free’ money. The uncertainty around how the market will react once trading opens is what is causing most to sit and wait before investing in Bitcoin Cash. If those who received their free coins rush out and sell them at $400 a piece, then it’s likely that the cryptocurrency will plummet. Whether it then rebuilds a foothold like Ethereum Classic managed to do, will remain to be seen.
However, the market could surprise everyone and Bitcoin Cash could end up becoming a strong contender. Those who support it are selling off the original for the new and their determination could see the cryptocurrency rise up from the proverbial ether to become a real player that’s worth the investment. Either way, it is going to be a very interesting road ahead for both Bitcoin and Bitcoin Cash and for those who are keen to invest, perhaps the best strategy is to wait and see. In November, when the next step of Segwit2x takes place the reality behind the Bitcoin shift and sentiment will make itself known and that is when the market will be nervously paying attention.
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