Bitcoin (BTC) is rushing from record to record – and should definitely not be confused with Bitcoin Cash (BCH). Because despite some similarities, the investment opportunities with Bitcoin Cash seem to be significantly lower.
In early January 2021, Bitcoin (BTC) is hitting new all-time highs almost daily, most recently taking the $37,000 per BTC mark seemingly effortlessly. In this gold-rush mood, some investors are looking for more cryptocurrencies in which they sense profit opportunities. A good 90 cryptocurrencies are listed on trading platforms that have the word “Bitcoin” in their names. According to market capitalization, Bitcoin Cash (BCH) is the most important after the original. But beware: there are good and understandable reasons why the success story of BTC is not automatically repeated for Bitcoin Cash. We’ll explain why:
- The history of cryptocurrencies began with the launch of Bitcoin in January 2009. Since then, BTC has been the benchmark for all other cryptocurrencies. Bitcoin Cash (BCH), on the other hand, has only been listed on crypto exchanges worldwide since summer 2017. BCH was created through a so-called hard fork. In such an event, the blockchain as the technological basis of a cryptocurrency is changed in such a way that it is no longer backward compatible.
- In the case of BCH, the hard fork meant the separation of the blockchain from the original Bitcoin. Parts of the investors and developers had noted the small size of individual blocks of a maximum of 1 MB as a technological minus point with BTC. This limited data capacity means that Bitcoin can basically organize and document a maximum of 12 transactions per second in the blockchain. The camp behind Bitcoin Cash decided to take a different path at the hard fork and has since allowed larger blocks, which also allows more transactions per second, now a good 100.
- However, the hope that Bitcoin Cash’s theoretically more powerful blockchain would also attract more capital than Bitcoin was not fulfilled. The majority of investors decided to leave their balances in BTC. By comparison, the original Bitcoin is backed by a market capitalization of nearly $700 billion as of January 2020, while Bitcoin Cash has this important metric at just over $8 billion.
- This striking difference in market capitalization has a clear cause: Bitcoin has found a clearly defined purpose as a store of value. Companies and private individuals store balances in Bitcoin to hedge their capital against inflation risks. This is why Bitcoin is also called “digital gold.” Bitcoin Cash, on the other hand, wanted to convince by finding its purpose as a means of payment in everyday life, hence the “cash” in the name. In this use, the higher number of possible transactions per second would indeed be a weighty argument. But BCH has not established itself as a means of payment in the online world. The number of places that accept Bitcoin Cash as a means of payment is still manageable.
- Bitcoin’s continued gains are largely due to more and more large institutions and companies opting for BTC as a store of value. They are buying the “digital gold” with the intention of protecting capital from the threat of inflation. The profit opportunities are initially more of a nice side effect. But this trend of shifting cash reserves into cryptocurrencies only captures BTC. Institutional investors, companies, and private assets are basically not interested in Bitcoin Cash at all; they prefer to invest their capital in the original rather than the copy.
- And why has Bitcoin Cash not become a store of value? The basis for a cryptocurrency’s tamper-resistance is the blockchain and the computing power coupled to it. The more different network participants a blockchain gathers, the more secure it becomes. These computing capacities are added up under the indicator hash rate. For Bitcoin, more than 110 PH/s sals hashrate are currently measured, for Bitcoin Cash, only slightly more than 1 PH/s. Conversely, this means that Bitcoin Cash is much more susceptible to the situation where a single network participant takes over more than half of the total computing power and could then manipulate transactions. According to data analysis, such a 51 percent attack on Bitcoin Cash’s blockchain currently costs, in theory, less than $9,000 per hour. Even worse, in the recent past, Bitcoin Cash has seen several cases where temporarily the blockchain was indeed dominated by individuals (camps).
Race between BTC and BCH seems decided
The most meaningful benchmark in the competition between cryptocurrencies is the medium- and long-term price performance compared to Bitcoin. And here Bitcoin Cash has continuously lost value. In other words, those who invested money in Bitcoin Cash were able to realize profits in euro or US dollar terms under certain circumstances. But those who would have opted for Bitcoin as an investment right away should now enjoy significantly higher profits, the size of which depends on the timing of the investment. A little food for thought: Bitcoin Cash’s historic all-time high dates back to December 2017 and was a good $4,000; today, BCH is trading at just under $450. Bitcoin also has an all-time high of just under 20,000 US dollars to report for December 2017 – but today stands at well over 30,000 US dollars.
Thus, many suggest that Bitcoin Cash’s train has sailed as a competitor to Bitcoin. BCH has never found a clearly defined use case or purpose in practice, whereas the “digital gold” BTC has. And when it comes to the idea of becoming an online means of payment, Bitcoin Cash has not achieved the spread that its competitor Litecoin (LTC) has.
Bitcoin: the original beats the imitators
If you are now getting into crypto trading or considering investing in cryptocurrencies, as mentioned at the beginning, you will come across many coins where “Bitcoin” is part of the name. Among them are windy imitators like Bitcoin POS. But let me tell you: In the now twelve-year history of cryptocurrencies, no other project has managed to even come close to the significance of the original Bitcoin. This is listed under the abbreviation BTC. Almost 70 percent of all capital stored in cryptocurrencies gathers there, which in turn guarantees constant liquidity and fairly formed market prices. BCH for Bitcoin Cash is indeed an established cryptocurrency and has recently been supported by PayPal. But in all likelihood, BCH will no longer be able to take first place from the real and first Bitcoin. For the reasons described above, Bitcoin without the name suffix embodies the far better investment opportunities.
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