The second major Bitcoin hard fork, a fork that was supposed to take place in November, was a complete flop.
Creators of the Segwit2X fork abandoned the idea at the last minute due to “lack of support,” according to multiple Bitcoin news outlets. Seeing as the first hard fork which created the much maligned Bitcoin Cash, was not profitable for many people. Investors did not expect the Segwit2X failure to affect the price of Bitcoin very much.
On the contrary, it did – at least over the short term. Many Bitcoin investors perceived the Segwit2X failure they way they did due to the Bitcoin infrastructure. It didn’t help that leaders in the traditional industry of finance were doing their best to scare everyone away from Bitcoin. Jaime Dimon, it seems, had been able to pull together a few allies in the weeks following his initial announcement that Bitcoin was a bubble. (A bubble, no doubt, that he is secretly investing in.) The culmination of these two factors was enough to cause a slight pullback in the Bitcoin bull market.
The pullback, however, did not last very long. As it stands today, Bitcoin has far outpaced its max value before the failed hard fork. There have also been some side effects that no one could have predicted.
Bitcoin Cash, it seems, serves the cryptocurrency community as a hedge against Bitcoin in bad times.
Overnight, Bitcoin Bash jumped from around $400 of value in USD to around $1,000 value in USD. This occurred at the same time that Bitcoin proper faltered. The most fascinating part about the moves – in the week following the Segwit2X failure, Bitcoin and Bitcoin Cash maintained the same aggregated value. When one went down, the other went up by approximately the same amount.
Bitcoin Cash has maintained its higher value even as Bitcoin recovered and continued its march upward. At the time of this writing, Bitcoin Cash holds around $1,200 of value in USD. Although the inverse proportionality of the two cryptocurrencies do not match as closely as they did before, they still move somewhat in tandem. Bitcoin Cash seems to still serve as a slight hedge against Bitcoin.
Why did investors suddenly give BCH this new responsibility – a responsibility that may have saved its relevance in the crypto market?
One may consider the actual utility of Bitcoin Cash – it is the cryptocurrency that is most like Bitcoin in its actual use. Dash, Ethereum – these currencies are just as popular as BCH, but they serve a fundamentally different purpose. Because control of the cryptocurrency markets have not yet quite left the hands of the technically savvy, BCH remained the next best alternative to invest in if Bitcoin faltered.
Does this mean that Bitcoin Cash is a viable alternative to Bitcoin now? Quite the contrary! BCH should not be viewed as a competitor to Bitcoin. This was never the intention of the hard fork, and the actions of the market showcased the true market utility of the currency. Anyone who still believes that BCH and Bitcoin have some sort of zero sum relationship may need to reassess their thought process on cryptocurrencies.
In case you haven’t noticed, Bitcoin Cash is now hovering around the price of gold.
Gold has always been known as the ultimate hedge. It is better to compare Bitcoin Cash to gold than it is to compare it to Bitcoin. Why? BCH and gold now serve the same purpose within their respective markets.
As far as viability, BCH has now proven that it not only has a technical purpose, but also a market purpose. If Bitcoin itself is seen as viable, there is no reason that investors should not trust Bitcoin Cash as well. The market seems to reflect this sentiment. There is no trend that shows BCH moving back down to its pre-Segwit2X levels. Total trading volume on the currency is up and continues to go up.
Finally, the name Bitcoin within the Bitcoin Cash moniker may actually be confusing some naive new investors into mistakenly investing in BCH. However, this currency may be faking it until it makes it. More Bitcoin hubs are accepting Bitcoin Cash as we speak, and this trend will only continue if BCH holds its value.
Regards,
Ethan Warrick
Editor
Wealth Authority
