Big News: Bitcoin Cash
We’re back! Sorry we missed you the past couple weeks… summer is upon us :)
Well, the hard fork actually happened and a miracle occurred… money was created out of thin air! On July 31st there was only one Bitcoin with a market cap around $44 billion. Now, two weeks after the split, Bitcoin has a market cap around $54 billion PLUS Bitcoin Cash (BCH or BCC depending on the exchange) with a market cap of over $5 billion.
The popular market cap or network value calculation for any cryptoasset (although flawed in several ways) is calculated as the number of tokens multiplied by its price. Ideally Bitcoin Cash will have the same number of coins as Bitcoin, and according to Coincap.io this is essentially the case. Now according to Bitcoin Cash’s market cap, it is now the 4th largest cryptocurrency, behind Bitcoin, Ethereum, and Ripple, so right out of the gate it has a lot to live up to.
Creating money out of thin air obviously leaves us with a few questions: Why does Bitcoin Cash exist? What is the future of BCH? What should I do with it?
The only other example we have to such an event was when Ethereum experienced a hard fork due to the attack on the DAO back in July 2016. Initially, everyone thought ETH would be the only coin to exist and the old chain, which became called Ethereum Classic (ETC), would slowly die out. However, over a year later and ETC has over a $1 billion market cap. The cause of the fork was essentially a philosophical debate about decentralization vs. centralization. The ETC community loved the underlying Ethereum technology, but didn’t like the idea of a governing body making decisions to alter the blockchain.
Will the same thing happen to Bitcoin Cash? The Bitcoin (BTC) vs. Bitcoin Cash (BCH) debate essentially involves this same theme of centralized control. BCH supporters want to increase the number of transactions, but those in the traditional BTC camp are worried about how that will centralize the authority of the miners. The debate is still ongoing but a few pros and cons of Bitcoin Cash as we see them:
Bitcoin Cash Pros
Improved scalability. Going back to the original Bitcoin whitepaper, Satoshi states that Bitcoin was envisioned to a be a pure peer-to-peer electronic cash based system. Bitcoin as we know it today is more like a store of value than a cash system with its long transaction time and high fees. Bitcoin Cash is trying to solve these problems and think the solution is through increased block size from 8MB instead of 1MB. Bitcoin fans argue that scale should be brought about through off-chain methods like the lightning network.
Harmony. Someone described it to me as a divorce. Now you have two parties that are super passionate about their way of thinking and now they have the opportunity to focus on it without contention. This new harmony may explain the additional value.
Bitcoin Cash Concerns
The “clonecoin” was hurriedly rushed into creation seemingly out of nowhere. ViaBTC and other Chinese Miners are the main supporters behind the project, but there seems to be lack of transparency and an intent to manipulate markets. Why the confusing name “Bitcoin Cash”? Why not create a separate altcoin like most other spinoffs from Bitcoin?
There is absolutely no Bitcoin Cash integration in the real world. It’s been difficult enough for the “traditional” world to accept Bitcoin, how do we now explain having to accept payment for another bitcoin? Dash, which also forked from Bitcoin but in contrast to BCH started with a new blockchain, is looking to solve the same scalability problem and achieve Satoshi’s vision of electronic cash. Here’s a good article exploring the two coins.
It has been very difficult and time consuming to mine Bitcoin Cash. Currently given that BTC is about 10x the price of BCH, and it’s about 4x more difficult to mine BCH, it's obviously much more profitable to focus on Bictoin. BCH block times have averaged over an hour and sometimes up to 13 hours. Compare this to Bitcoin’s average block time of 10 minutes. The block time is an indication of how long it takes to validate a transaction on the blockchain. Long is bad!
This should not be considered trading advice, but we are not bullish on the concept of Bitcoin Cash. We don’t think there’s anything wrong with holding on to it as a hedge, but we wouldn’t bet on it. We are guessing there will be periods where the coin gets pumped to surprising heights. But if you’re looking at the fundamentals, we would rather put our money on Dash.
We would love to get your opinion as well!
Spencer & Matt
Singapore has been seen as a safe haven for ICOs. Recently the Monetary Authority of Singapore came out with their own announcement about ICO legality. Link
Bitcoin went through it’s hard fork, does this mean the Bitcoin Civil War is Over? No, there are still hard fork propositions in place that will take this argument at least into November. Link
Thoughts on SEC ICO announcement thread. I will add my two cents and say that most ICOs will be deemed a security. This could have massive repercussions on the entities issuing the tokens and the exchanges. The biggest risk to investors is this could mean massive sell offs. Link
So far it looks like value was created out of thin air with Bitcoin Cash. This article states the exact opposite should have occurred. Time will continue to tell who is right. Link
Spencer thought long and hard about starting a crypto hedge fund. For anyone holding any type of crypto portfolio, read this. Link
Bitcoin Monthly Quant Report Link
ICOs have raised in total more than $1.5 billion since the first ICO in 2014. CoinDesk launched a new tool to keep track of new ICOs with their ICO Tracker. Link
Blockchain Author Alex Tapscott is working on taking his Token Investment Firm public on the Toronto Stock Exchange. Potentially giving access to the general investing public to gain exposure to cryptocurrency and token sales. Link
- Fidelity has officially partnered with Coinbase to allow you to see your cryptocurrency balance alongside your other Fidelity investments. Link
Filecoin’s ICO is starting on Aug. 10th. For all those accredited investors out there, here’s a few things to think about before investing.
Chart of the Week
Ever since the middle of June I have been bearish on the overall market cap of cryptocurrencies. I just thought everything got pumped up WAY too high and we needed an extended breather period. When the overall market cap reached about $65 billion I thought we would see a small bounce and then a continuation of dropping prices. Instead, the price has been incredibly resilient. It’s now apparent that a cup and handle had formed and the overall market cap has reached new highs. Just this week I’ve flipped to being short term and long term bullish! ~Spencer