Nuances of Trading Bitcoin Cash

Good afternoon, trader friends!

Today we will look at the cryptocurrency Bitcoin Cash, a not entirely ordinary hard fork of Bitcoin, which encroached on the “sacred” goal of overthrowing the father and mother of all altcoins and the main cause of the worldwide crypto fever. By tradition, we will find out how the cryptocurrency came into being, how to trade it, and on which platforms.

Bitcoin Cash was the result of the community splitting into two opposing camps. The reason was the scalability problem of Bitcoin in its current form. The fact is that every Bitcoin transaction must be confirmed by the network before it is written into a block. Creating a new block takes a certain amount of time, which together with the growth in the total number of transactions creates the system’s “bottleneck.”

Transaction priority is affected by the fee amount set by the client, according to which a kind of live queue for transfers is formed. In reality, money can take several days to arrive, or it can freeze altogether if the sender specified an insufficient reward. The proposed solution of increasing the block size partly solves the problem by increasing network throughput, but it creates another one: the danger of power centralization among large miners.

As a result, the original Bitcoin branch remained with minor changes, while Bitcoin Cash became that very hard fork of Bitcoin, increasing the block size from 1 to 8 MB. Because of this, Bitcoin Cash excludes any compatibility with the original blockchain.

Bitmain is a leading manufacturer of ASIC miners for Bitcoin and other cryptocurrencies. For reference, an ASIC is a specialized microchip designed to solve one specific cryptographic task. That is, it is the most efficient way to obtain cryptocurrency through mining, far more efficient than mining with a CPU or video card. Bitmain equipment accounts for more than 60% of Bitcoin hash power.

Thus, all the facts indicate that the active PR campaign for Bitcoin Cash is a planned action aimed at shifting funds and pushing the original Bitcoin out of the market. The most serious precedent occurred in November 2017, when the Bitcoin Cash rate more than doubled in a single day. This no longer looks like the result of purely speculative interest, but rather a deliberate transfer of funds into the Bitcoin Cash chain.

Bitcoin Cash price dynamics in November 2017

The coin’s success is largely determined by its capitalization: money attracts even more money. Here the attack came from all sides: informational and exchange-based. Articles are published praising all the advantages of the hard fork and disparaging the conservatism of Bitcoin, and agreements are also made with major exchanges in order to direct speculators into the “right” channel at the necessary moment.

The head of Bitmain states that the future belongs to Bitcoin Cash as a faster alternative to Bitcoin. In fact, there is nothing revolutionary in the hard fork and it does not solve long-term problems. In essence, the owner of the new project became the largest ASIC miner manufacturing plant, which is already absurd. For now, we can sum up the results of a well-planned but not fully completed campaign: at the moment, cash accounts for roughly one fifth of Bitcoin’s capitalization.

A historical chart of the currency is available through the online service TradingView. The official ticker of the cryptocurrency is BCH, but on some exchanges the instrument is listed as BCC. Not surprisingly, the most popular currency pair is BCH versus BTC. In second place is the US dollar.

Bitcoin Cash trading via CFD is available from such brokers as AMarkets, FXOpen, and ForexClub. The comparison table shows the trading conditions for the BCHUSD pair.

Standard trend indicators do not work very well, and the reason is overly delayed signals, to the point that it is more profitable to trade them the other way around, opening positions in the opposite direction. This is primarily due to the very high volatility of the instrument, with the cryptocurrency’s value rising and falling many times over within several days.

On the other hand, psychological round levels that are multiples of 100 dollars work excellently. The price almost always bounces off even values. Slightly less often, bounces occur from intermediate levels that are multiples of 50 dollars.

Given the current market situation, namely heightened excitement and high volatility, it makes sense to trade the currency on a breakout. Any channel indicator will do for this. Bollinger Bands are a good choice, because they also adjust to the current amplitude of fluctuations.

The strategy is very simple: enter in the direction of the breakout when the candle closes beyond the outer boundary of the channel. The order is without a take profit; it is better to manage the trade with a trailing stop loss set at the level of the Bollinger channel’s middle moving average.

The pair also respects harmonic Fibonacci extension levels. Using a fib grid, you can determine the moment the pullback ends and the approximate targets of the position. To do this, stretch the grid relative to the nearest extremum and wait for a bounce from the 38.2% level.

As soon as the bounce occurs, it is a sign that it is time to enter in the direction of the price movement. The nearest target is the 161.8% level, which the price reaches almost always. The second target is the 261.8% level; it can be used to close the second part of the position.

The currency has a high degree of correlation with BTC, but this dependence is not long-term, it is situational. That is, cash can move in line with bitcoin for a very long time, but as soon as any serious news trigger appears, the correlation coefficient can sharply turn negative. Therefore, the instrument is unsuitable for statistical arbitrage.

The Bitcoin Cash rate rises when Bitmain opens sales of new ASIC batches. This is because, starting in October, the company has been selling new equipment only for Bitcoin Cash. According to the CEO, this is due to pure cost savings, since the Bitcoin Cash network fees are significantly lower than those same Bitcoin fees.

Follow the official Twitter of BITMAINtech to always stay informed about new arrivals. The next intake of new orders is expected after the Chinese New Year (in February). That means a new wave of growth can be expected from the second half of February.

Despite all efforts, Bitcoin Cash failed to sink Bitcoin, and it is unlikely that it will ever be able to fully replace it. Even so, the project has firmly taken its position in the cryptocurrency market, of course, not without the help of officials. For speculators, however, this is a good opportunity to earn money, considering that practically any confrontation is often an overflow of money from some wallets into others.

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Sincerely, Alexey Vergunov TradeLikeaPro.ru