Bitcoin Cash Watch: Will it Float or Sink?

Two weeks into the new coin's life, here's an overview of market and technical performance.

Bitcoin Cash appeared less than three weeks ago and already went through several dramatic price changes. The newly forked blockchain also faces network-related challenges when it comes to having enough miners and achieving the promised speed.

Bitcoin Cash Price Discovery

The price of Bitcoin Cash after the initial launch was anything but stable. The coin spiked quickly to nearly $700, but then quickly fell to $200.

Last week Bitcoin Cash (BCH or BCC) had little price change, but ahead of the weekend spiked quickly from $300 to above $500. Trading volumes peaked from the usual $130 million to $1.5 billion, close to the 24-hour trading volume for Bitcoin. On Thursday, BCH added more than 57% to its value. BCH appreciated from 0.06BTC to nearly 0.12 BTC.

But who pushed BCH to its recent peak? The most active markets for the new coin trade the pair BCH/Korean Won. Nearly 39% of BCH/KRW trading volume passes through Bithumb, the South Korean exchange. Together with Korbit and Coinone, more than 50% of BCH trading is between the new coin and the Korean Won.

Despite the recent hacking and money loss, Bithumb is still an active hub that mops up the increased interest of South Koreans in cryptocurrencies. Partially, the interest may increase due to the escalation of North Korean nuclear missile ambitions, and cryptocurrencies may serve as an alternative store of value.

The Bitcoin Cash Blockchain

If you open a blockchain explorer to see how mining is going, you will see almost all, or all the latest blocks were discovered by an Unknown miner. This is unusual in the world of cryptocurrencies, and reveals that most of the mining for Bitcoin Cash happens to belong to one influential miner or pool of miners, whose prevalence over the network was almost absolute for the last 24 hours under review.

This means currently the blockchain is open to 51% attacks, when a single large miner can kidnap consensus. So far, this has not happened, but it goes counter to the usual practices of spreading mining efforts, to avoid having entities with too much influence on the network.

Initially, the Unknown account had lesser influence, but in the last 24 hours, it has mined 77 blocks or more than 96% of the total pool. A week ago, the pool distribution changed dramatically to the current distribution of mining power. BCH receives the support of a very few miners, and most block discoveries happen for the Unknown account.

Mining difficulty is scheduled to rise by 43% in a few days, which may make mining more profitable. So far, it seems there are anonymous interests behind BCH, expecting a rise in popularity and price. But there is no telling when BCH owners decide to sell off for profit, or if they will hold the currency and wait for the project to acquire a real reputation, beyond sharing a name with the king of cryptocurrencies, Bitcoin.

Bitcoin Cash mining may be done even without profitability, as a signal of support for the project.

But at the end of the week, the market will hold its breath to see if the suddenly active trading and price gains stabilize, or are wiped out by selling.

 Bitcoin Cash Users

So far, Bitcoin trading may be slowed because of the backlog of wallets who still strive to claim their BCH holdings. There are no indications what users would be doing with the new coin. Selling from a few big wallets or many small ones may depress the price, while holding may signal confidence in the long-term gains of the project.

In the past week, Bitcoin Cash (BCH) proved it is still extremely volatile and full of surprises. If you hold BCH, weigh the benefits of selling versus holding to see how the future developments affect usability and market price. Otherwise, only expose yourself to the risk of BCH if you can afford to lose your investment in whole or in part.