Why is Bitcoin Cash so cheap?

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As the 11th largest cryptocurrency globally, Bitcoin Cash has proved to be a good investment since its inception in late 2016. According to coinmarketcap, this cryptocurrency has a $12.08 billion market capital and a current trading price of $557.82. Thus, it is a successful bitcoin fork, and many crypto experts believe that it will grow further in the future.

In the past two years, bitcoin cash has been performing relatively low when compared to bitcoin. In December 2017, 1 BCH was equal to 0.285 BTC than its current value of 0.0115 BTC. In this article, we will analyze why is Bitcoin Cash so low by looking through its past market performance.

What makes Bitcoin Cash so low compared to Bitcoin?

Founded in August 2016, Bitcoin Cash resulted from developers forking bitcoin in an attempt to improve it. As a result, Bitcoin Cash uses the same underlying technology as bitcoin. But, it offers faster, cheaper, and more scalable than bitcoin. In turn, more and more people are embracing this cryptocurrency, leading to its increased value over time.

Immediately after its launch, Bitcoin Cash received plenty of support from the crypto community. It became prevalent, with approximately 1500 blocks created within a month. Also, mining pools, like ViaBTC and Antpool, embraced this digital currency and directed high volumes of hash rate to mine BCH. After a few months, its price began dropping, making Bitcoin Cash so low compared to Bitcoin.

Bitcoin Cash Technical price analysis

When Bitcoin Cash came into the market in 2016, it had the support of many businesses and top industry figures. At that time, it had a market value of $543. The market price began growing rather quickly, allowing it to reach its all-time high of $3,556 in December 2017, around the time bitcoin peaked to $20,000. 

Given that 2018 was not a good year for the crypto market, Bitcoin Cash was not an exception. As the market prices began crashing down in the second half of January 2018, the price of BTC also followed the trend. The price dropped until it hit its initial price when it first launched. The price continued to fall as the months went by. But, the cryptocurrency became a bit stable between February and November 2020 with fluctuating prices of $230-$270. Occasionally, it went above or beyond these values but often stayed within these limits.

Currently, Bitcoin Cash does not follow bitcoin’s lead, despite its past trend. While bitcoin’s price surged by thousands of dollars in the past, Bitcoin Cash has only experienced a few fluctuations. It is yet to reach its all-time high as it is currently trading at $557.82. So, why is the price of Bitcoin Cash so low?

Reasons the poor performance of Bitcoin Cash

1.    Forking from Bitcoin Cash

In 2018, Bitcoin Cash underwent its own split, which led to Bitcoin SV's creation (BSV). Some BCH team developers proposed some development upgrades to the cryptocurrency, but they did not meet universal support.  Consequently, this led to a hard fork from the BCH blockchain to create Bitcoin SV, which stands for Satoshi's Vision. This crypto vowed to follow Satoshi Nakamoto's white paper for Bitcoin, hence its name.

BSV has a bigger blockchain than Bitcoin and Bitcoin Cash. Thus, it offers users a better user experience, cheaper and faster transactions, and a higher level of security. However, the virtual coin did not receive as much support as is expected over the years. With many people confused about its operation, users avoided trading and investing in it altogether. Currently, Bitcoin SV is the 18th largest cryptocurrency globally, with a $5.035 billion market cap.

Later, Bitcoin Cash experienced another split in its blockchain, forming Bitcoin Cash ABC (BCH ABC) and Bitcoin Cash Node (BCN). For a while, the crypto community was unsure which of the two would be the most dominant and whether the original would change its name to 'official.' Eventually, BCH ABC emerged victoriously and changed its name to BCH. As you can see, this cryptocurrency can easily confuse new investors and traders since they essentially have almost similar names. Thus, many new investors and traders avoid them to reduce their risk of losing money.

2.    Bitcoin Cash halving after Bitcoin halving

If you are an advanced investor or trader, you should be familiar with the term 'bitcoin halving.' It is an event when bitcoin rewards are cut in half. The most recent bitcoin halving occurred in May 2020, and the next one should occur in November 2021. When such events occur, the crypto market experiences a ballooning in price followed by a large drop.

The last Bitcoin Cash halving event took place a few weeks before Bitcoin halving. Its Block Rewards reduced from 12.5 to 6.25, pushing BCH miners to switch to mining bitcoin to work under higher Block Rewards.

3.    Poor and insecure working conditions for BCH miners

Another reason why is Bitcoin Cash so low is because of the poor working conditions of its miners. The economic throughput in the Bitcoin Cash network is at an all-time low. Initially, the network could process about 90,000 transactions per second. Now, it can only handle less than 56,000 transactions, leading to lower revenues for its miners.

With the hash rate dropping by 3% since bitcoin halving, Bitcoin Cash miners receive only 0.05% of revenues from transaction fees. In comparison, bitcoin miners receive about 10% of their revenues from bitcoin transaction fees. 

Furthermore, a lower hash rate highly contributes to the insecurity of a network. In turn, the BCH network is quite vulnerable to attacks as dubious miners could easily launch a 51% attack on it. Luckily, there has not been any significant attack on the network yet.

Conclusion

As bitcoin continues to gain more popularity, crypto analysts still seek to answer why is Bitcoin Cash so low, yet it has followed bitcoin’s upward trend in the past. Essentially, Bitcoin Cash is a better cryptocurrency than bitcoin itself. But, it has failed to soar closer to bitcoin’s success because of the reasons mentioned above. Luckily, Bitcoin Cash still has a dedicated community that stands by it despite the hurdles it may face.

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