On Tuesday afternoon, Coinbase, the largest and most popular cryptocurrency exchange in the world, added a new currency offering; Bitcoin Cash.
Bitcoin (BTC) did not take the news well, dropping 15% as a result of the new offering.
The world’s most well known cryptocurrency rebounded from its $3,000 drop, but is still down as Bitcoin Cash (BCH) continued to climb.
Can BTC and BCH coexist?
What is the difference between the two?
Which of the two currently presents the best opportunity?
Bitcoin Cash is the result of a fork.
A fork is when the code of a specific coin is upgraded and altered. This results in a new coin, or fork. The new currency is similar to the old coin, and is generally compatible with the old crypto, but has some modification. In the case of Bitcoin Cash, it was designed to allow faster and cheaper transactions than Bitcoin.
Many Bitcoin owners opened Coinbase and were pleasantly surprised as they saw “free money” in their account. Those extra funds came as a result of the fork. When a fork happens, the created coin issues funds matching the original amount owners held at the time of the fork. So for every Bitcoin owned on August 1st, 2017 (date of the fork), coin holders would be given a matching new coin. So if someone held .1 BTC, those coinholders would then find .1 BCH in their account.
While that’s nice for those of us who owned Bitcoin on August 1st, the vast majority of people still hadn’t even heard of BTC at that time. But now that those funds have been issued, will we see a massive sell off in BCH? Or even in BTC?
While there is no direct connection between the two cryptos, there is a correlation. The market amounts to a zero sum game. As of this writing, the cryptocurrency market has a total cap of $626 billion. Bitcoin owns the majority share of that at $284 billion. However, just 24 hours ago, BTC’s cap was valued at over $320 billion — a 12.5% decrease overnight.
Bitcoin Cash is eating away at Bitcoin’s market cap as traders see an opportunity to own whole BCH coins and sell off their BTC in favor of the new coinbase offering.
Can this last? Is Bitcoin being supplanted by Bitcoin Cash?
Bitcoin’s meteoric rise is unsustainable. However, replacing one surging digital currency with another unsustainable surging cryptocurrency doesn’t exactly work, either.
The entire market looks due for a correction, but there’s no way to know when. Bitcoin, Ethereum, Litecoin, and now Bitcoin Cash have all blown past resistance after resistance without any major pullbacks. Now, the Big 3 (BTC, ETH, LTC) are showing chinks in their armor as money flows out of their caps and into BCH.
Does that mean crypto is about to crash?
Volume continues to increase, with the 24h volume being nearly $60 billion.
The state of crypto is unchanged. And while there may be a new challenger to the crown, Bitcoin Cash won’t dethrone Bitcoin.
In the short term, BCH will hold onto the spotlight for a while, but Bitcoin remains the crypto standard.
Between BTC futures expanding among Wall Street traders and the creation of new coins into Coinbase accounts, traders could see a lot of shorting as coin holders look to take profit. But that’s going to compete head to head with the latest buzz around BCH driving new money into exchanges, creating volatility.
For now, trying to predict where prices will go may get frustrating. In crypto, now more than ever, the trend is your friend.
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