Chandler Guo, a major Chinese investor in bitcoin, ether and cryptocurrency mining, recently criticized Bitcoin Cash, led by China-based mining pool operator ViaBTC, which successfully forked away from the Bitcoin blockchain on August 1. Mainstream media outlets have added to confusion amongst the general public with inaccurate representations of the Bitcoin Cash markets.
“Bitcoin Cash cannot be Considered as Bitcoin”
In a Twitter video, Guo explained that Bitcoin Cash cannot be considered as bitcoin and that by nature, it is an alternative cryptocurrency (altcoin). According to local sources including CnLedger, the vast majority of businesses within the Chinese bitcoin industry also perceive Bitcoin Cash as an altcoin.
As shown in the table above provided by CnLedger, OKCoin, Huobi, BTCChina, Yunbi and CHBTC, five Chinese exchanges that control over 83 percent of the Chinese bitcoin exchange market share, have unanimously described Bitcoin Cash as an altcoin and a new blockchain asset. Even ViaBTC was reluctant towards characterizing Bitcoin Cash as bitcoin and instead described it as “a new technical solution of bitcoin by big blockers.”
Initially, Bitcoin Cash was introduced as Bitcoin ABC by Bitmain as a contingency plan towards Bitcoin Improvement Proposal (BIP) 148 or user-activated soft fork (UASF). It explicitly explained in its official company blog post that it only intended to pursue Bitcoin ABC if the Bitcoin Core development team’s transaction malleability fix and scaling solution Segregated Witness (SegWit) failed to activate via BIP 91.
Ultimately, the activation of SegWit was finalized by the bitcoin mining community as the overwhelming majority of nearly 100 percent of the bitcoin network’s hashpower signaled for the activation of SegWit via BIP 91 and BIP 141, the original SegWit proposal authored by Bitcoin Core developer Pieter Wuille.
However, after SegWit activation was finalized and the industry came to a consensus to pursue Segwit2x, a proposal that entails the activation of SegWit and also an increase in the Bitcoin block size to 2MB, ViaBTC abruptly announced that it will still pursue the Bitcoin ABC project of Bitmain under a different title called Bitcoin Cash.
When ViaBTC first introduced its plan to fork the Bitcoin blockchain on August 1, Bitmain was initially caught off guard. In its second blog post, Bitmain refrained from stating that it will support or sponsor Bitcoin Cash but clarified that it will collaborate with ViaBTC to help the project achieve success.
Miners including Chandler Guo and businesses such as the abovementioned five Chinese bitcoin exchanges are likely rejecting Bitcoin Cash and the proposal by ViaBTC because the bitcoin industry and mining community came to a consensus to pursue the path of Segwit2x and scale bitcoin securely and efficiently. Instead of following the roadmap agreed upon by most parties within bitcoin, ViaBTC solely pursued the Bitcoin Cash project and decided to fork the Bitcoin blockchain on August 1.
A part of the reason why major miners such as Chandler Guo are against the execution of hard fork on August 1 is the timing of the project. Developers, miners and businesses rushed to activate BIP 91 despite security issues outlined by prominent developers including bitcoin hardware wallet manufacturer Trezor architect Slush.
Hence, the decision to create Bitcoin Cash within such a short period of time after SegWit activation was finalized was not welcomed by most investors, traders and businesses.
Still, experts including BitGo engineer Jameson Lopp and Bitcoin.com founder and CEO Roger Ver encouraged the community and the industry to wish the Bitcoin Cash development team a success in their future endeavors. Lopp stated:
“Best wishes to all those forking off to Bitcoin Cash in a few days. Hopefully you can collaborate to build something great.”
Some of the mainstream media have misrepresented the Bitcoin Cash (BCH) markets, such as one Business Insider article published August 2 which opened with:
“Bitcoin cash has already secured its place as a top cryptocurrency, just a day after it entered the marketplace.”
A more accurate representation would be given by considering CoinGecko, which has the altcoin ranked at number 13, which is based on more than just price and supply. Pointing to the flawed measure of market capitalization as an appeal to raw, hard data, the article also gives a sense that Bitcoin Cash is on a smooth uptrend, but makes no mention of the real state of the market and its incompleteness:
“Bitcoin cash is up about 80 percent since its inception. That’s a higher appreciation than any of the other top 10 cryptocurrencies.”
The Price Development of Bitcoin Cash
The price development has not been uniform across exchanges. The chart below shows the 2-hour price action for BCH-USD on the Kraken exchange, while for the Bittrex exchange, which has taken most of the volume for Bitcoin Cash, the price is much higher. A break below $420.00 on the Kraken exchange will point to further losses, as this is a key fractal support. A wild price swing of more than $500 on August 2 are also displayed, where Bitcoin Cash retreated from a high of $811.00 to a low of $303.00. Similarly, over the past 24 hours, the altcoin has traded between a high of $963.66 and a low of $472.16 on the Bittrex exchange.
Although Bitcoin Cash is third in terms of market capitalization on coinmarketcap.com, the slow pace of blocks minted on the forked version of the blockchain seem to be making it difficult to sell and transact with BCH. Furthermore, it is not a complete market, with many bitcoin holders still unable to deposit their BCH to exchanges like Bittrex and Kraken; a lot of sell pressure is alleviated. Users can buy and sell once they deposit bitcoin into these exchanges however. Also, major hardware wallet provider Trezor has also delayed the BCH functionality, with lots of selling pressure, presumably, remaining latent. The market has hardly formed and there is a lot of uncertainty, so more volatility in the Bitcoin Cash market is expected.
On the other hand, BTC-USD has displayed resilience and performed quite strongly in the aftermath of the fork. After reaching a peak at $2929.17 pre-fork, the price of bitcoin then fell to a low of $2615.00. Since August 1, the price has recovered to $2762.00 at the time of writing and looks to be making an attempt at the recent high, with the Ichimoku cloud holding as support.
Adding $2,762 and $432, that makes a total of around $3,194, a price signficantly larger than the pre-fork high of $2,929.17. It seems, for now, that the split has been taken positively, with the reduction in the network effect of Bitcoin on the sidelines and the positive effect of two warring sides departing each other dominating. But the situation could quickly change, as the race is on for many people to sell their Bitcoin Cash once an exchange confirms deposits.
Contributions by Jamie Holmes