Good start: Focus on BCH Price Trends
One of the most enticing things about cryptocurrencies are the competitive aspects of them. Coins work through their own form of natural selection in the markets while a certain cryptocurrency challenges the position of another.
With Bitcoin Cash, or BCH, we are seeing a similar competitive environment emerge as BCH vies for the spot of Bitcoin Legacy (BTC). As of today (February 22), Bitcoin Cash makes the top 4 cryptocurrencies by market cap with the BCH/USD price of $1,209.
Bitcoin Cash — A Primer
For those who don’t know, BCH is a cryptocurrency that was established during a hard fork of Bitcoin Legacy in August of 2017. The big debate in the Bitcoin community was whether the size of blocks should be increased in order to allow more transactions per minute.
BCH allows for more transactions to be processed, which makes it a more scalable version of Bitcoin. This is where the moniker “Cash” originates from. It is meant to step in as the most liquid and spendable currency on the market. Bitcoin was set out to take this spot, but the rising transaction times and fees have made it more of a store of value than a medium of transfer.
Although BTC is the main competition of BCH, Litecoin (LTC) is the closest competitor right now. They are both vying for the position of “silver to Bitcoin’s gold”. Their liquidity and lower fees make them an appealing day-to-day alternative to Bitcoin, which now has increasing fees and a slower trading time.
During the Crash
To really understand the price movement of BCH, one has to understand how it performed in the cryptocurrency crash of January 2018. This was a key moment for all the currencies as their prices plummeted from all time highs, although only retracing a few months.
Bitcoin Cash holds the 4th highest market capitalization at approximately $20 billion at the time of writing (February 22). It has held this spot for a while, and the only thing that could cause this to change is a flippening, which is what it would be called if traders decided to put their full support behind BCH instead of BTC.
This sort of a rally would be relatively unheard of, but is the goal of those who support BCH. They believe themselves to be holders of the superior cryptocurrency, and things have gotten rather political in their efforts to bolster their holdings.
It was considered possible that BCH might have engineered this turnaround during the crash, but it suffered just as much as everyone else. It plummeted from its high in the $4,000’s all the way down to the $780’s. What has made it interesting as a potential investment is how quickly it has come back when compared to other cryptocurrencies.
Just since it’s low on February 6th, BCH has increased a full 82%. Granted, the whole market has gone through this retracement, but the way it took off in the beginning (22% in the first 24 hours after its low) says that investors are eying a bull run on it.
Where are the Trends Heading?
The current price of BCH is in the $1,200’s, and it is maintaining a range it has held for the last few weeks.
Analyzing Bitcoin Cash’s price outlook requires a deeper analysis of the trends it is making and breaking in the markets. In terms of USD, the price has been trying to break through several resistance levels for a while now. It was trying to get past levels of $1,550 for most of the week but has now come back down to support levels around $1,200.
Where it will go in the future is defined by what levels it breaks through, but in the meantime it seems to be trading relatively horizontally compared to USD and declining compared to BTC. These are both trends that indicate the market norms being restored.
Support levels of $1,450 have been broken, but $1,200 seems to be a likely low for the time being. The resistance level at $1,550 has shown itself to be difficult to surpass, but the total market capitalization of the cryptocurrency market is still righting itself, so this may prove to be a waiting game.
It is important to also notice the downwards trend in terms of BTC. It has always been traded in a certain range here, and now that it is heading towards a low against BTC, it is likely to find its bottom and restore its positive correlation with it.
It may be that BCH never achieves market dominance over BTC, but it could adapt to become a complement of Bitcoin. When one analyzes the two securities, you can see how they aren’t truly in direct competition with each other. Litecoin is the competition BCH needs to be worried about, and when taking the long view, it is necessary to assess these two coins against each other, as well as the development potential that is present.
The present trends may well be broken, but it is likely that BCH will maintain its 4th place position in terms of market capitalization for a time to come. In the coming weeks, we will likely see the strong positive correlation between BCH and BTC restored and the total market capitalization of the cryptocurrency market breaking through $500 billion again.
BCH is considered controversial by some of the market, but has a potential use case that it caters to nicely. Whether it can achieve market dominance in this regard is dependent upon the development team and its many other proponents.