When cryptocurrency is mentioned, one of the first words a person would think of is probably Bitcoin (BTC). The biggest and most popular digital asset is known even to non-crypto enthusiasts. But did you know that Bitcoin has created several crypto assets through hard forks or changes in network rules? One of them is Bitcoin Cash (BCH), and BTC’s lesser-known spawn has been some big price pumps recently. Let us explore what exactly BCH is and the cause for the increase in value.
History of Bitcoin Cash
To understand BCH, we need to understand what a fork is first. A Bitcoin fork is a change to BTC’s protocol that creates a new branch of the blockchain. This splits the existing blockchain into two. There are two main types of forks: hard and soft. A soft fork does not create a new blockchain, while a hard fork creates a new one.
Bitcoin Cash is a result of a hard fork. It was created in August 2017 because of disagreements within the community. Supporters of BCH wanted to increase the block size limit of BTC from 1 MB to 8 MB, which would speed up transactions and lower gas fees.
Bitcoin Cash is also a proof-of-work (PoW) asset like BTC; it needs miners or nodes to secure its network and validate transactions. New tokens are created by rewarding the miners who solve complex cryptographic puzzles and add new blocks to the blockchain.
What Caused Bitcoin Cash’s Pump?
The chart above shows that BCH has been trading flat for a while before a sudden pump of more than 100% took place. The pump started on June 21, which is the day after EDX Markets, a new crypto exchange, was launched. What makes this new exchange special is that it is backed by financial giants like Fidelity, Citadel, and Charles Schwab. These institutions have trillions of dollars under management.
According to EDX Markets, the exchange will only be offering four digital assets, namely Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH). If we are going to look closely, BTC, LTC, and BCH are all PoW assets, and none of them offered an Initial Coin Offering (ICO). And this is important because the Securities and Exchange Commission (SEC) can go after digital assets that are not decentralized enough and have offered an ICO. EDX Market’s choice of crypto to be offered in its platform can be taken as the “safer option.”
Smaller investors usually look at where big institutions are putting their money. If big companies like Fidelity and Citadel are interested in BCH, then they have probably done their research. This is the possible reason why there is a sudden demand for Bitcoin Cash.
Will BCH Go to the Moon?
The price of any asset is determined by a lot of things. This includes demand from consumers and applicable regulations. Interest from big names in the financial sector will surely spike up the demand for any digital asset. The question right now is if BCH can sustain the uptrend.
Whether BCH will sustain its rise or not will also be determined by regulatory clarity. Bitcoin Cash is PoW, and it also did not offer ICO, which in theory, will make it less likely to be targeted by the SEC. However, this does not make it immune from regulatory actions. A clear legal framework is still needed.
In the end, the market will react to news surrounding an asset. We have to keep our eyes and ears open, so we will know where and when to catch the next waves.
Featured Image from Pixabay
