What can we learn from Bitcoin Cash’s halving?

Created in 2017, Bitcoin Cash (abbreviated as BCH) works according to the same principle as the cryptocurrency known to everyone. It emerged following disagreements over the size of blockchain blocks, and diverges slightly from bitcoin. Its difference? Larger blocks, supposed to improve the speed of transactions, but which also require more computing power from miners. This split is called a fork, that is to say a bifurcation in the code starting from the same starting point.

This rebellious bitcoin, however, remains popular: it is the 15th most important cryptocurrency on the market. It currently weighs 9 billion dollars. In itself, there could be an infinite number of bitcoins. Since the code is open source, anyone can copy it to launch their derivative cryptocurrency. A 3rd bitcoin was even created from Bitcoin Cash, the Bitcoin SV (BSV). However, today, only BTC is recognized as the authentic original cryptocurrency, thanks to the solidity and legitimacy acquired over the years. A simple question of trust therefore, as with traditional currencies.

Seventeen days later

Like bitcoin, Bitcoin Cash was entitled to a countdown for its halving. And as for BTC, this event was eagerly awaited. For good reason: it halves the reward received by miners, who participate in the proper functioning of the network. This time, the gain was reduced from 12.5 BCH to 6.25 BCH. Every 4 years, a small revolution takes place. But this period of time is never really known with precision.

Thus, Bitcoin Cash is ahead of BTC by two weeks in the halving race. He simply validated more blocks: 2,500 more, to be precise. Two reasons can explain this: a slightly different algorithm, and the vagaries of the network's computing power, which varies depending on the behavior of miners and demand. Put end to end, these small discrepancies become significant, and result in these 17 days of difference. This also explains why it is so difficult to determine the exact date of the bitcoin halving.

Bitcoin miners at a standstill: turbulence on the blockchain

But being the first has nothing advantageous for Bitcoin Cash, on the contrary. Since the Bitcoin Cash reward is reduced in advance, miners have tended to unplug their machines to fall back on the Bitcoin network, always twice as profitable. This resulted in a huge drop in computing power (hash rate) of the network. Normally, a specific algorithm ensures that each block is produced every 10 minutes, adjusting the mining difficulty. But because of this sudden drop in network power, some blocks took up to 30 minutes to be validated. Consequence: network congestion, a drop in confidence, and therefore, in price.

The same could happen with bitcoin. Many miners will suddenly become less profitable and will be tempted to shut down their machines or even sell them. Because there are other cryptocurrencies to mine, like Dogecoin (Elon Musk's favorite) or Litecoin which could offer better returns. And to survive halving, miners don't go into detail: they go to the highest bidder.

A very unstable price

In terms of price, the transition was therefore not without turbulence. First observation: instability in the price of Bitcoin Cash has increased significantly. Before the halving, the price of BCH tripled in the space of a month, going from 250 to 700 dollars. Many investors have thus anticipated the scarcity of the digital token, supposed to cause an increase in demand.

In the short term, Bitcoin Cash has indeed seen an increase. Boosted by the halving, it saw its price increase by another 10% just after its transition. But its momentum was quickly halted: its price quickly plummeted to around $450. Again, some analysts see this as a warning of what could also happen to BTC. It could return to $40,000, following almost the same order of magnitude.

In theory, based on the behavior of BCH, bitcoin could therefore experience a sharp decline after the halving. But according to Bybit analysis, it wouldn't really matter. Because bitcoin could break records again in the next 12 months, in line with historical precedents.

The halving of Bitcoin Cash, a preview test

The behavior of Bitcoin Cash is considered a good simulation of what will happen to bitcoin during its own halving. In 2020, BTC had generally followed the post-halving trend established by BCH. A big boost which had dragged other cryptocurrencies into its race. This increase was once again able to verify that historically, this event is followed by a bull market, also called a “bull market”, as opposed to the bear market.

The comparison, however, has some limitations. Bitcoin Cash is only in its second halving, while BTC is entering its fourth. Additionally, over time, the cryptocurrency market evolves and becomes less unpredictable. Likewise, the data appears to show a decrease in the impact of halvings on the price of cryptocurrency.

This update of the Bitcoin software remains a major event, with an almost magical dimension for the most fervent followers, who are obviously impatiently awaiting an increase. Perhaps rightly so. Because there is something that Bitcoin Cash does not have and that changes everything: the arrival of Blackrock ETFs. These new financial products lead to a huge influx of money which inexorably inflates the price of the first cryptocurrency. And even more since a Chinese version of ETFs was approved by the Honk Kong Stock Exchange.

Will bitcoin be able to change without too much damage? Response April 20.