BTC and BCH Market Analysis

BTC and BCH

Recently, the BTC (Bitcoin) and BCH (Bitcoin Cash) markets have been quite volatile. Major events had significant influence on the markets. This blog post provides an overview of BTC and BCH, the respective differences, as well as an analysis of the recent market movements.

Difference Between BTC and BCH

BCH was created on 1st Aug. 2017 splitting from the BTC chain on block 478,558 in the form of a so-called hard fork. A hard fork is characterized by a backward incompatible change to the network rules. In the case of Bitcoin cash, this was the block size increase from 1MB to 8MB.

Initially, the 1MB block size limit was set to avoid potential DDoS attacks. It was also a compromise given the limited bandwidth of users — with bigger blocks, it takes more time for users to download a new block and more disk space to store the entire blockchain.

However, with the growing number of transactions, the 1 MB block size limit becomes more and more problematic. Users are faced with longer blockchain verification times, as more users and transactions compete to get included into the next block. A simplified example: if one block has space for 100 transactions, but 150 transactions are waiting to be included, the network will automatically select the 100 transactions, which are willing to pay the highest fee. The remaining 50 transactions would have to wait for the chance to get included into one of the next blocks. BCH was created to solve this problem by increasing the base block size, to have space for more transactions. BTC on the other hand, has a different technological roadmap on solving the scalability issue via sidechains and state channels.

Although BCH was supposed to ‘outperform’ BTC, BTC still enjoys the reputation of the most renowned and secure cryptocurrency, with support of most developers and a higher price. When created, BCH was approximately 10% the price and market-cap of BTC. The circulation of BCH was exactly the same at the time. BCH also utilizes the same PoW consensus algorithm, but with lower difficulty and hashing power. Currently, the BCH circulation is about 0.7% higher than BTC due to the higher mining speed of BCH. In short, BCH was created to solve scalability with a base blocksize increase, whereas BTC utilizes different technologies to enable more transactions.

Market Analysis

BTC/USD

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Source: Cryptocompare.com

Derived from the daily candlesticks, the short-term indicator EMA 5 (orange) and EMA 10 (green) are heading down, while the mid-term indicator EMA 50 (blue) is on a rising trend. This indicates that BTC is facing a short-term downward correction, with support level at about $ 5500, while in the mid- and long-term BTC will maintain a rising trend.

As for MACD, the lowering MACD also suggests a short-term downward correcting of BTC.

BCH/USD

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Source: Cryptocompare.com

Both short- and mid-term indicators are on a rising trend. BCH has risen by 120% within 3 days, which indicates a short-term downward correction of BCH. This should not change the rising trend in the mid- and long-term.

Market Information

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Source of Data: Coinmarketcap.com

By 21st Oct. 2017, over $1 million in bitcoin swaps and options were traded on LedgerX in its first week.

On 31st Oct. 2017, derivative giant Chicago Merchant Exchange (CME) has announced plans to launch a regulated bitcoin future exchange. More institutional and professional investors can include bitcoin exposure into their portfolio if the planned exchange is set up. An obvious up-trend has been formed right after this announcement and has lasted for about 1 week.

On 8th Oct. 2017, however, it was announced that the planned SegWit2x fork has been cancelled. This fork intended to increase the BTC blockchain’s block size to 2 MB and it has gathered plenty of support of miners. Many supporters & developers, however opposed this change and thus the fork was cancelled. The BTC price did see a downward trend since the announcement and did not recover yet.

Note: this article is the personal opinion of the Author, and should not be treated as the opinion of any company or organization. It also should not be regarded as professional financial investment advice.

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