Looming Bitcoin Cash Fork causes 30% increase in price. Here’s Why:
Over the last 24-hours, Bitcoin Cash (BCH), the fourth largest cryptocurrency by Market Capitalization has undergone meteoric gains. From its opening price of $473, Bitcoin cash has jumped 30% in value and is now trading at $560 at the time of this writing. The crypto markets have been relatively stable and quiet for the last month. As such, every trader is asking themselves: “What Happened”?
Below, we will be looking at Bitcoin Cash while trying to determine what caused this digital asset to have such a sudden, and strong performance in the market.
Hard Fork vs. Soft Fork
While many are speculating that the price jump can be attributed to the networks imminent fork , it’s critical to understand the difference between a hard fork and a soft fork, as each will yield widely different outcomes in the market.
A hard fork is a change to the networks protocol that makes all previously invalid blocks/transactions valid. Therefore, all nodes and/or users are required to upgrade to newest version of the protocol software. Once the hard fork is live, the chain splits into two separate chains. Since a hard fork effectivley creates two separate blockchains, users who hold the pre-forked coins will get a deposit of the newly forked coins that is of an equivalent value to their positions. Comparatively, a soft-fork is is a change to the network’s protocol where only the previously valid blocks/transactions are made invalid. Thus, not all node’s and/or users are required to upgrade to the newest protocol software.
From a market perspective, investors usually prefer hard forks because they get these newly generated coins for just holding the old ones; it’s about as close to free money as you can get.
Technical Progress:
While a lot of price movement in the cryptocurrency market is fuelled by speculation, one of the most tangible metrics to analyze digital assets through is the technology under the hood. Thus, with Bitcoin Cash’s hardfork expected to go live on November 15th, a lot of people familiar with the technical proposals are trading the asset under the assumption that the fork will improve Bitcoin Cash’s value proposition as a cryptocurrency. So, lets look at some of the technical improvements that the hard fork is supposed to address:
The hard fork will seek to integrate three main implementation proposals; Bitcoin ABC, Bitcoin Unlimited, and Bitcoin SV
- Bitcoin ABC: Will add new features such as smart contract capabilities, oracle services, and scaling improvements to the BCH Network
- Bitcoin SV: Will expand the Bitcoin Cash’s blocksize from its current size of 32MB, to the maximum size of 128MB.
- Bitcoin Unlimited: Bitcoin unlimited will implement both the changes of the Bitcoin ABC and SV proposal, enabling miners to vote for the features they want.
Ultimately, these proposals are aimed at improving the scaleability of the network to increase its Transaction-Per-Second (TPS).
Market Reaction:
Another key variable that has undoubtedly caused this sudden rise in Bitcoin Cash’s value has been the overwhelmingly positive reaction from the Cryptocurrency exchange community.
Some of the industries largest exchanges such as Coinbase, Binance, and BitMEX have all released formal statements, announcing their support of the upcoming hard fork. To the casual investor, this news is far more important then the technical improvements being rolled out through the fork itself. To the casual investor, this is the validation they were searching for to show them that the Bitcoin Cash fork will not affect the market adversely.
While details are still scarce, one thing is for certain; the incoming fork, coupled with the markets largely positive reception towards it have been the catalyst behind BCH’s massive surge in value.
