Forked ‘bitcoin cash’ cryptocurrency experiences rollercoaster first week of trading as viability is questioned
In a pivotal and volatile week for the future of digital currencies, bitcoin was forked into two to create bitcoin cash, amidst a fight over how much to increase the size of the original bitcoin Blockchain.
Bitcoin cash began trading earlier this week, and rocketed up to $727 on Wednesday, only to crash to less than half of that — $310 — only hours later.
As of trading on Thursday afternoon, the price of bitcoin cash had returned above $400, according to CoinMarketCap.com. But trading remained chaotic for the fledgling currency, ranging from $395 to $519 in the day alone.
It all started Tuesday, when a “user-activated hard fork” was implemented due to a split in the bitcoin community. Advocates say the forked bitcoin Blockchain ledger will grow and scale better than the original thanks to upgraded consensus rules.
Market watchers remain skeptical. Coinbase Chief Executive Brian Armstrong explained that his currency exchange is in no rush to begin trading bitcoin cash, and will wait to see if the currency catches on.
“Our goal is to be the safest, most trusted & compliant, and easiest to use,” Armstrong said. “Not the first to market with new assets.”
The creation of bitcoin cash came about because the bitcoin community is divided on solutions for dealing with increased demand. Going forward, traditional bitcoin and the new bitcoin cash will pursue two different paths with regards to their blockchain protocols.
To address the split, starting Tuesday digital wallets with bitcoin were given matching bitcoin cash coins. However, the values were not equal, as the two currencies have different levels of worth.
For now, a key milestone for traditional bitcoin is an anticipated increase in the block size from its current 1 megabyte level. A majority of bitminers, or those who compete to validate and store transaction information, support an increase to 2 megabytes, which is expected to go into effect by November.
If and when the so-called “Segwit2x” scaling agreement goes into effect, it could be a blow to the new bitcoin cash. But conversely, if the 2-megabyte chain bump is delayed or not embraced, bitcoin cash could ultimately benefit.
In the interim, support from Coinbase could also bring some needed legitimacy to bitcoin cash, particularly as its value has yo-yoed in the first few days. One Coinbase investor, Barry Schuler, indicated to Business Insider that he believes the exchange could reverse its decision and allow bitcoin cash in the next few days.
“Currently, they’re evaluating the activity — how the blockchain matures, if there’s the appropriate level of mining activity,” Schuler said. “It’s very important that there’s liquidity.”