Aug
9
IN A DEVELOPMENT reminiscent of New Coke and Coca-Cola Classic (or, if you prefer, of a bisected hydra), Bitcoin split in two on August 1. As the industry puts it, Bitcoin reached a “hard fork,” dividing itself into “classic” (my word, not theirs) Bitcoin and Bitcoin Cash.
No one was surprised. The metaphorical fork had loomed in the metaphorical road for some time. Underlying the split is the fact that classic Bitcoin can process only one megabyte of transactions at a time, making transactions painfully slow. With Bitcoin’s meteoric rise in popularity and value—on Monday both Fortune and CoinDesk valued it at just under $3500—frustrations have risen, too.
As CNBC reported, Bitcoin Cash boasts a whopping eight-megabyte transaction limit. That certainly should speed things up. But then, the value of Bitcoin Cash will be inversely low. According to NextBlock Global Chief Investment Officer Charlie Morris, Business Insider reports,
… as soon as the split takes place most people will see their bitcoin holdings double. But that doesn’t mean the value of investors’ holdings will double.
Morris told Business Insider that bitcoin cash (BCC) has been trading in the futures market for about $200 to $400. Thus, if a split were to occur BCC would trade somewhere in that range while the value of bitcoin would witness a decline equal to the value of the new bitcoin.
Reactions to Bitcoin Cash have been for the most part tepid.
BitMEX, Bitstamp and Coinbase will not support or allow trading of Bitcoin Cash. According to The Verge:
A spokeswoman for CoinBase says, “If this decision were to change in the future and Coinbase was to access Bitcoin Cash, we would distribute Bitcoin Cash to customers associated with Bitcoin balances at the time of the fork. Coinbase would not keep the Bitcoin Cash associated with customer Bitcoin balances.” The exchange allowed a brief window of time before August 1st for users who wished to access Bitcoin Cash to withdraw their funds from Coinbase.
But, then, that’s as of this writing. Things change fast in the cryptocurrency world.
Things looked rosy at first, when Bitcoin Cash enjoyed an initial blip in value. But a fast decline followed on its heels, which caused enthusiasm to wane. Or perhaps it was the other way around, that is, waning enthusiasm caused value to decline. Or, perhaps not-so-natural market forces are at play: Bitcoin.com has suggested that interested parties may be artificially attempting to slow down Bitcoin Cash.
Not every sky over Bitcoin Cash is gray.
The new step-sibling seems to have had a positive effect on the original Bitcoin. According to Fortune,
“On a market cap basis, the price rise in bitcoin very closely mirrors the decline in Bitcoin Cash, indicating that investors are selling their Bitcoin Cash for Bitcoin,” said Matthew Newton, market analyst at trading platform eToro. “Additionally, investors that preferred to wait out the hard fork last week are now moving back in.”
Meanwhile, pending stakeholder approval, Bitcoin’s transaction limit is slated to increase to two megabytes in November. And it may be that the Bitcoin split has strengthened the cryptocurrency concept overall. According to The New York Times,
The divisions have, if anything, increased the excitement and the value of all the virtual currencies in the world—and banks and governments have announced their own projects to harness the technology.
In short, don’t give up on cryptocurrency. Given the rapidity of change in the field, it’s a good idea to check up on developments at least daily.