Just like bitcoin, bitcoin cash had a big year in 2017. Though it only split from the main chain in early August, bitcoin cash has already justified its existence in the cryptocurrency industry and successfully managed to take a big piece of the pie. The price of bitcoin cash has been a hot topic, and not without drama. But by reaching important milestones, it has already proven that it belongs in the same space as its big brother.
Handling the Fork
During the most heated debate the bitcoin community had ever witnessed, the issue of scaling broke bitcoin apart – literally – by forking two separate viewpoints on the issue into different blockchains. Price discovery mechanisms in the form of futures contracts were already in place, and on August 1, 2017, some exchanges listed the BCH ticker symbol and issued the coin in proportion to the number of bitcoin the user had at the time, starting at a value of around $250 per coin.
The significance of bitcoin’s big fork event almost tripled the price in a single day, by going up to $661 on August 2nd. However, low liquidity conditions due to a lack of wallet and exchange support saw prices push back lower in mid-August.
The core bitcoin community ridiculed bitcoin cash during this dip, largely because they saw the fork as a money grab and not a legitimate answer to bitcoin’s scaling problem. There was a rally cry to sell the BCH that exchanges allotted and use the proceeds to purchase BTC or other altcoins instead.
However, as bitcoin cash went lower and lower it also gained support from major exchanges, giving it greater volume. Nearing $208, opportunists seized the trade and bought in, driving prices to new highs of over $900 per coin on August 19th. Miners can also take responsibility for the turnaround. After this burn to bitcoin cash’s cynics, who lost out on nearly quadruple gains, the currency gained legitimacy yet was still portrayed as the villain, or bitcoin’s opposite.
"The price run-up of Bitcoin Cash was largely a reaction to Bitcoin’s rising fees and congested network," according to Noam Levenson, CEO of Advent, a blockchain investment and research firm. "But more significant than the dramatic price increase was the rift that it represented within the Bitcoin community. As a faster and cheaper version of Bitcoin, Bitcoin Cash is backed by those who believed Bitcoin has to scale quickly to stay relevant within the industry.”
A Villain From Inception
This rivalry is another reason for the streak past $900 in mid-August and is itself due to the way that bitcoin cash’s mining difficulty algorithm rewards the miners who provide processing power to blockchain networks. Part of the original debate that caused the fork, the market had not yet seen how bitcoin cash’s new algorithm worked.
An automatic adjustment in bitcoin cash’s Emergency Difficulty Adjustment on August 9, 2017, made it suddenly more profitable to mine, drawing an enormous amount of processing power and boosting prices as well.
Bitcoin cash’s alternative algorithm for mining difficulty gave it an inverse relationship with bitcoin.
Despite the brief boom that bitcoin cash enjoyed due to its unique functionality, the inverse relationship that sentiment assigned it had consequences in the following months. During the slow run-up of bitcoin’s price from September to early November 2017, bitcoin cash suffered a mirror-image deflation, eventually shrinking back down to $330 as bitcoin’s notoriety fueled its momentum higher.
Segwit 2x Sends Bitcoin Cash Price Skyrocketing
More than any other event before it, the failed bitcoin fork for Segwit2x fueled bitcoin cash’s sudden breakout to over $2,500 on November 12th. Another fork with ambitions to upgrade bitcoin’s core blockchain with new scaling tools, Segwit2x failed to achieve consensus and did not fork into a new coin as scheduled.
As anyone who is privy to the cryptocurrency market knows, sentiment is the biggest driver of price, and the sentiment during this time was not behind bitcoin. Those who had educated themselves on bitcoin’s scaling issues in anticipation of Segwit2x invested in bitcoin cash as soon as the other alternative disappeared.
Prices quickly retreated under $1,000 per coin as the somewhat unjustified nature of bitcoin cash’s latest boom came to light. However, the event also served to establish a new paradigm for the currency and remove any inverse relationship it had with bitcoin. A
fter Segwit2x shook bitcoin from over $7,300 to below $6,300, it had its recent climb to $20,000, but curiously, bitcoin cash also grew significantly in dollar value during this time, ascending from $1,200 to find a new level of support at $1,800 per coin.
Tumult in Bitcoin Markets
The feather in bitcoin cash’s cap for 2017 was likely its listing on Coinbase, arguably one of the most influential exchanges among others in the cryptocurrency industry.
In a blog post in early August, Coinbase announced it would accept bitcoin cash, would make trading possible in 2018, but then introduced trading in mid-December before anyone expected.
Bitcoin versus bitcoin cash performance since fork (USD)
The significance of the event was not lost on anyone. Coinbase had only three cryptocurrencies on their exchange for many years, and so naturally, prices for bitcoin cash immediately climbed. Demand from Coinbase customers and other market participants saw prices briefly reach $8,500 before the exchange halted trading.
The instability of the entire industry’s infrastructure was put in the spotlight at this very moment, and when bitcoin cash debuted at an official post-halt price of $3,400, the correction was already in full swing. Bitcoin took a 45% hit, falling as low as $10,500 per coin, but has since found equilibrium once more, as has bitcoin cash at around $2,900.
During the last four months of 2017, bitcoin cash went from being a divider of communities, to a serious threat, to a grudging accomplice in bitcoin’s intense price movement. Its colorful history is no more of a rollercoaster ride than any other cryptocurrency however, and 2018 will likely see bitcoin cash’s legitimacy echo its growing sense of maturity in a rapidly developing marketplace.
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