Bitcoin Cash loses value slightly after halving

BCH’s halving is the 1 of 3 major BTCs events to go through this year — next one is its fork BSV followed by BTC in mid-May


THE fifth-largest cryptocurrency by market capitalisation, Bitcoin Cash (BCH), has lost 5% of its market value worth US$250,000 (RM1.09 million) within a day, soon after the alternative coin underwent halving protocol.

BCH is a digital money that is a fork of Bitcoin that came into the market in 2017 and halving is a process which cuts the supply of new coins in half, which subsequently shrinks the miner’s block production rewards as well. This reduces the supply of new coins entering circulation.

According to eToro senior analyst Nemo Qin, the BCH halving — which is for the first time in four years — has affected miners’ profitability, which tanked 27% on the day.

He said, however, more transactions are being made per day and increased hash rate has proven the block activity and mining activity haven’t really been pushed down even with less mining profitability.

Hash rate refers to the amount of computing power miners are using to validate the Bitcoin (BTC) blockchain.

The more power, the more notionally secure the blockchain is.

A large hash rate can also be taken as a statement of the attractiveness of mining for participants.

“Looking at its price post-halving — if the short-term trend is quite strong — this should be seen as just a setback with some profit-taking,” the leading multi-asset investment platform analyst said in a note published yesterday.

After the halving on Wednesday, BCH reward per block down to 6.25 per block from 12.5 per block previously.

Qin said in the last 24 hours transaction on April 7, 95,286 BCH were transacted compared to only 34,060 the day before.

Meanwhile, the block time within the period has also increased from nine minutes 40 seconds to 11 minutes 20 seconds. This he said translated to the 27% of loss revenue to the miners.

In terms of trading price, BCH is currently trading at US$264 (as of writing), compared to the price before halving, which is US$278, according to CoinmarketCap.

Qin said investors tend to believe that BCH is one of the best alternatives for BTC, since it is a peer-to-peer cash system and mainly used for daily small payments.

“Its speed, low cost, censorship resistance and BTC ‘genes’ all make it an attractive investment,” he added.

According to Qin, from a technical standpoint, BCH has formed a symmetrical triangle that should be considered as a bullish continuation chart pattern in the short term.

“However, the short-term rally does not imply a long-term trend.

“For instance, Litecoin had a short-term price surge of 15% last year. These gains were then gone when the price continued its downtrend, wiping almost 50% value off from the asset,” Qin said.

Like BTC, BCH is also designed with a maximum supply of 21 million coins. The current circulation supply of BCH is now 18.38 million coins.

The BCH’s halving is the first of three major BTCs events to go through this year. The next one is its fork Bitcoin SV (BSV) on April 10, today, and followed by BTC in mid-May.

Some analysts believe miners will switch from BCH and BSV in this month until BTC’s halving, trying to compensate for lost revenues.

Meanwhile, in a weekly note published early this week, the country’s leading cryptocurrency exchange platform, Luno (M) Sdn Bhd said the early halving of BCH before the other two might have a dramatic effect on the BCH and BSV hash rate.

“This will have various implications for the protocols. Both BCH and BSV will be drastically more exposed for potential 51% attacks, following the reduction of the hash rate.

“The effects on BTC however will be minuscule, since Bitcoin already accounts for almost 95% of the SHA-256 hash rate,” Luno said.

The UK based firm added a temporary almost halving of the hash rate on the BCH and BSV networks can be expected as the miners switch to mining BTC instead.

Luno said miners’ will be motivated by greater profits that they could generate in BTC mining compared to BCH and BSV.

“Unless, the fees or price of BCH and BSV increases drastically, or the hash rate almost halves. This will last until BTC has its halving in the mid-May,” Luno said.