What is bitcoin cash?

Bitcoin cash (BCH) is both a cryptocurrency and payment network. It was created as a result of a hard fork with bitcoin in December 2017, with the aim of increasing the number of transactions that could be processed. 

Forks occur when the software of different miners disagree over the best way forward for the currency. It’s up to miners to decide which blockchain to continue using. If there isn’t a unanimous decision, then this can result in the creation of two versions of the blockchain. There can be periods of increased price volatility around such events. 

In this instance, the hard fork in bitcoin occurred because there was a disagreement around how best to increase the block size limit. One group of influential miners, developers and investors favoured a protocol called SegWit2x, which was due to be implemented to the bitcoin network in August 2017. Those who disagreed with this protocol were involved in the creation of bitcoin cash. 

Since its launch, bitcoin cash has become one of the most successful bitcoin offshoots. Roger Ver, a prominent investor and early bitcoin adopter, is an advocate of bitcoin cash, previously describing it as ‘the real bitcoin’. Roger Ver was a prominent supporter of bitcoin as early as 2011, as a means of promoting economic freedom. He has since moved to support bitcoin cash, favouring its lower transaction costs and times.

What are the differences between bitcoin and bitcoin cash?

As we have seen, bitcoin cash was created as a result of a hard fork with bitcoin. This means that while there are similarities, there are also some key differences between the cryptocurrencies.

Find out how to trade bitcoin.

BLOCK SIZE

One of the problems with bitcoin was that as it became more popular, transactions were processed more and more slowly. This was a result of a 1MB limit for the size of every block. The SegWit2x protocol was intended to increase the block size limit to 2MB. Comparatively, bitcoin cash does not have a SegWit, and originally had a block size limit of 8MB in 2017, allowing it to process transactions much faster. This limit increased as of May 2018 to 32MB, and could increase further if cash blocks near capacity.

Interestingly, the much anticipated Segwit2x was not implemented on bitcoin as planned, which led to a significant rally in bitcoin cash at the expense of bitcoin.

ALGORITHM

Bitcoin cash has a different hash algorithm to bitcoin. This means that replay between the two blockchains is no longer possible. If bitcoin cash splits in future, there is a replay and wipeout protection plan in place. With this, it’s thought that if a fork occurs, both chains could coexist with minimum disruption to all involved.

EMERGENCY DIFFICULTY ADJUSTMENT (EDA)

Bitcoin cash uses a new algorithm which helps to ensure the blockchain functions as normal should the number of miners change dramatically. It helps to provide an additional stability to the cryptocurrency.

How to trade bitcoin cash

When you buy bitcoin cash on an exchange, the price is usually quoted against the US dollar (USD). In other words, you are selling USD in order to buy one unit of bitcoin cash. If the price of bitcoin cash rises, you will be able to sell for a profit, because it is now worth more USD than when you bought it. If the price falls and you decide to sell, then you would make a loss.

With CMC Markets, you trade bitcoin cash via a CFD account. This allows you to speculate on bitcoin cash price movements without owning the actual cryptocurrency. You aren’t taking ownership of the cryptocurrency. Instead, you’re opening a position which will increase or decrease in value depending on its price movement against the dollar.

CFDs are leveraged products. This means you only need to deposit a percentage of the full value of a trade in order to open a position. You won’t have to tie up all your capital in one go by buying bitcoin cash outright, but can instead use an initial deposit to get exposure to larger amounts. While leveraged trading allows you to magnify your returns, losses will also be magnified as they are based on the full value of the position.

Why trade bitcoin cash with CMC Markets?

Open a long or short position

CFDs allow you to trade on both rising and falling prices. You don’t have to own bitcoin cash in order to ‘sell’ it (go short) with us, which is not possible on cryptocurrency exchanges.

Efficient use of capital

Leveraged trading means you only deposit a small percentage of the full value of a trade in order to open a position. With mainstream cryptocurrency exchanges, you would need to deposit the full value of the contract. Remember that both profits and losses will be magnified, and for retail clients you could lose up to the amount you deposit.

No exchange account or bitcoin wallet

Unlike buying the underlying cryptocurrency, there is no need to open an exchange account or wallet to hold the cryptocurrency you have bought. This means no waiting for approval from the exchange, no concerns about keeping your wallet secure, and no fees if you want to withdraw funds later.

Trade with an established provider

CMC Markets is a regulated provider. We have over 30 years' experience in the industry and also offer support for all our clients whenever the markets are open.

Trade responsibly

Cryptocurrencies are not yet widely accepted today as a medium of exchange and can be extremely volatile. The outlook for cryptocurrencies is binary – it’s likely they’ll either fail or take over the world. This is some of the factors that drives the higher risk and higher potential reward nature of cryptocurrency market.

What are some factors that affect bitcoin cash’s price?

Bitcoin cash’s volatility is driven by several factors, including:

• Scalability problems with bitcoin: bitcoin cash was created from a bitcoin hard fork to offer an alternative to some of the slow transaction problems seen by bitcoin. If bitcoin continues to see problems with scalability, this could have a positive impact on bitcoin cash’s price.

• Regulation: like other cryptocurrencies, bitcoin cash is currently unregulated by both governments and central banks. There are questions about how this may change over the next few years and what impact this could have on its value.

• Supply: bitcoin cash has a total supply of 21 million (the same as bitcoin). Limited supply could have an impact on its value.

• Competition: bitcoin cash is in direct competition with bitcoin, as well as several other cryptocurrencies. This may limit the popularity of bitcoin cash.

• Sentiment: prices can be affected by public perception, security and longevity.

• Adoption: currently it hasn’t been widely adopted by businesses or consumers as a method of payment. But, some see potential in the blockchain technology and think this could become more widely adopted in the future.

​*​Please note we may, at our sole discretion, restrict your ability to go short.