It's perhaps the most controversial cryptocurrency ever. Stating the name online can spark heated debate. Now Bitcoin Cash (BCH) is in technical trouble.
BCH was thought of long before August 2017's hard fork of the Bitcoin (BTC) blockchain. It has its origins in the Bitcoin block size debate that began in 2015. The block size debate was an argument about how big blocks in the Bitcoin blockchain should be. Small blockers oppose a block size limit increase because that would mean greater centralization of mining. Bigger blocks earn more fees for miners, and larger miners can better afford the bandwidth and mining hardware necessary for bigger blocks. Bigger blocks can compromise the security of Bitcoin, making it more difficult for full nodes to download and verify the entire blockchain. Proponents of small blockers argue that the fee market should help solve the problems of transaction confirmation and acceptance, and that scalability issues should be fixed with sidechains that allow transactions off the blockchain.
Big blockers want a block size limit increase because a limit increase would mean greater support for more users. Bigger blocks would benefit users by making transactions more inexpensive, accessible, and reliable. Scaling the network to become a global system capable of handling numerous transactions per second would make it easier for new adopters and ordinary people to use Bitcoin. Smaller blocks mean that transactions take much longer to become confirmed and have a greater risk of not being confirmed. Merchants need to accept payments within seconds in order for Bitcoin to be widely adopted. Finally, the fee market that arises from blocks reaching the limit hurts users. Fees should be as low as possible. So big blockers decided to fork the Bitcoin blockchain and create bigger blocks as an experiment.
Although the price of BCH has increased since August, it shows weakness compared to the overall crypto market. It has been hit hard by the 2018 bear market, and it is down more than its peers BTC, Ethereum (ETH), and Litecoin (LTC). On the Kraken exchange, BTC is down 50% from its all-time high, ETH down 40%, and LTC down 50%. But BCH is down over 75%. And BCH has underperformed other major cryptos year-to-date and in February.
Long-term investors have reason to worry. A technical analysis of BCH reveals bearish odds. On the 1-day chart, BCH keeps making lower highs and lower lows, breaking through support levels. Its moving average convergence divergence (MACD) is about to go negative again. And volume during most green days in 2018 has been lower than average. These factors suggest that unless something drastic and fundamental happens, BCH price will continue in a downtrend. Finally, BTC's transaction fees and speeds have decreased since December, so an advantage of BCH is diminishing.
The only investors who should hold are those who sincerely believe the technological vision of Bitcoin Cash. Investors interested in fast, cheap transactions can switch to NANO or LTC. Investors into next-generation blockchains can reallocate to ETH or Neblio (NEBL). But BCH holders need to understand they will keep encountering bearish momentum.
The author holds long positions in BTC and LTC.