In today ‘s analysis, I would like to highlight three reasons why Bitcoin Cash is still well below its peak in November 2017.As a reminder, Bitcoin Cash (BCH) was launched on the 1st.August 2017 under the name of (Hard) Fork of Bitcoin.The basic idea was to adopt the Bitcoin protocol (BTC), but adding the maximum block size increase from 1 MB to 8 MB.This allows the network to process more transactions at a lower cost than Bitcoin.In addition, the acquisition of the SegWit protocol was deliberately avoided at that time.So much for prehistory.
The analysis of today is difficult, but honest.It can therefore be very useful to give you an idea of the number of obstacles to overcome in the cryptography market.
In addition, this can be a good evaluation for your next purchase.Bitcoin Cash – the portrait of a lost person?
Although the focus on Bitcoin Cash was weak or even nil at first, it changed quite quickly as it became clear that the signatories of the New York Accord were not looking to increase the number of blocks.Thus, the fact that 6 CEOs linked to the New York deal refused to switch to SegWit2x (and therefore a maximum block size of 2 MB) was a huge benefit for Bitcoin Cash.
The CoinMetrics data (respectively the graph below) show how, as a result, the BCH price of .08333BTC “has soared” to reach an all-time high of 0.24613.And, as often, there are fast price movements that interest people.The consequence of this price increase has therefore been increased interest by the media.
However, we are currently in the month of August of the year 2019 and Bitcoin Cash is far from its record of November 2017.Expressed in US dollars, it is still a drop from 91% compared to ATH.Something better (but really only something) is when you take Bitcoin as a reference; because BCH is only 87% lower.
Enough Foreword and Introduction – Let’s take a closer look at the possible reasons why Bitcoin Cash is not yet a success and certainly does not pose a threat to Bitcoin.1.
Bitcoin is mainly used as a store of value
One of Bitcoin Cash’s stories has always been to pretend to be closer to Satoshi Nakamato’s vision of using Bitcoin as a peer-to-peer electronic payment system.Due to the increase in block size, more transactions can be processed cheaply.
BCH should therefore be a good payment option.
The following sentence is questionable and weighs heavily, but I say it all the same: what will happen if the majority of people do not want to use crypto for their daily payments? If you say yes to that, it’s the most obvious reason why Bitcoin Cash is in trouble.And if the majority of people prefer to use cryptocurrencies as an investment object or as a store of value rather than as a means of payment?
To bring substance to these two questions, we use the data from chain-analysis company Chainanalysis.These show that 90% of Bitcoin network activity is related to trade.This number simply refers to the number of transactions.If we took the transaction volumes instead of the number, the percentage of result would probably be even higher.Because it is likely that the volumes that go through an exchange are much higher than the P2P payments between users.
Emphasize that it is not a statement “drawn by the finger”, as a result of (painful?) Graph.
And if you look at BTC’s current transaction fees, you will see a correlation with the trading volumes of the exchanges.
In other words, if there is an increase in activity on the stock exchanges, the fees will also increase.
The following graph, which comes from Longhash’s colleagues, clearly shows this fact: Bitcoin and Bitcoin Cash are rarely used as means of payment
At this point, we are about to be able to say the “hard truth”.It’s a fact that hardly anyone uses BTC for payments (daily).The upcoming chart not only highlights this, but also shows that the use of Bitcoin as a means of payment in the stores is even lower than at the beginning of 2017.
There may be reasons for that.Examples include price volatility, which remains relatively high, as well as Wallet’s more or less intuitive solutions.Another aspect could be for some how and if Bitcoin is taxed in case of direct payment.
It can therefore be summarized that the use as a means of payment and the use as a store of value are of opposite nature; because using it as a mere store of value “wastes space” and increases transaction costs, it reduces the attractiveness as a means of payment.
Now, I just mentioned the reasons why Bitcoin is not currently used as a means of payment.
However, I do not want to rule out that it will be used in the future as a means of payment or exchange.However, volatility must drop significantly; and now we come to an interesting point.
Because if Bitcoin establishes itself as a long-term store of value, it must automatically (which is the idea of a store of value) be less volatile.And again, we are at a point where it could also be interesting as a medium of exchange.The subsequent development of software solutions to speed up and improve transactions, especially via the Lightning network, contributes to its positive contribution.But where is the connection to Bitcoin Cash?
The message of this first point is this: the real reason for the existence of Bitcoin Cash (larger blocks and lower fees) seems to be just going to the extent of market requirements.
In other words, Bitcoin Cash has an interesting offer, but nobody asks for it.
Because in these (still “young” days) the world of cryptography, the focus is always on the Store of Value feature.Admittedly, it would be nice if Bitcoin could “take care” of low royalties today, but it is not so easy in the current circumstances.And under the current circumstances, for example, I hear the scalability limitations and / or network effects around the consensus protocol.
This keyword, network effects, could be the second reason why BCH is where it currently stands.2.
Bitcoin has network effects “on its side”
There is no doubt that BTC enjoys the benefit of the first comer, an advantage extremely difficult to overcome.Being a pioneer also means having the longest time, creating a community and having the most time to increase the strength of your own network.And it is precisely these fundamental principles that make life difficult for BCH.
In terms of key indicators such as hashrates and liquidity, BCH is by no means close to Bitcoin.According to Messaris OnChainFX, BTC has a “real 10 hours per 24 hours” combined transaction volume and an adjusted trading volume in the $ 1,527,098,193 chain, while the same measure for BCH is $ 33,192,795.We are talking about factor 50 (!).
In addition, these data do not consider that the median BTC transaction fee is US $ 0.70, while BCH’s median fee is well below US $ 0.01 (as a reminder, the median means that half of the values are located above the specified half and the other below).
the specified value).In other words, Bitcoin users are obviously more than willing to pay the extra fees to use a stable, secure and decentralized network.Bitcoin Cash Hashrate represents only 2.5% of the total BTC transfer rate
But as the saying goes, the worst is always possible.The most alarming metric is probably the BCH network hashrate.Because, according to fork.lol, the hash of BCH represents only 2.5% (!) Bitcoin network hash rate.
What catastrophic consequences this has on the security of the network, I do not need to do big right now.As Charlie said, founder of Litecoin (LTC), when a crypto-currency (in this case, BCH) has extremely low percentage points of the total rate (BCH + BTC) of a particular hash algorithm (in this case, SHA -256).
Place your finger a little deeper into the wound.BTC miners ‘incomes simply through transaction fees (ie explicitly without the current block reserve of 12.5 BTC per block) are already higher than BCH miners’ incomes while at the same time.Along with the year, including (!), in other words, there is virtually no incentive to exploit BCH over Bitcoin.And with the next halving of Bitcoin money in the coming year (April), this problem is exacerbated.
A summary of current results
This game could be continued almost endless and there will probably be a second article on this topic.Until now, Bitcoin Cash has been almost exclusively compared to Bitcoin; this makes sense insofar as it also comes from “coasts”.Also on the Bitcoin CashABC vs ..The BitcoinSV dilemma (we remember the hash war) has not yet been received.The Bitcoin Cash, Bitcoin in any case in many lower points, was probably clear in this article.
Nevertheless, a cryptocurrency can also succeed if it is better than other cryptocurrencies.And that’s exactly what we’re going to do in the next article, comparing Bitcoin Cash to Altcoins.
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[Bildquelle: Shutterstock, Longhash.com, Chainanalysis.com].
