What is Bitcoin Cash?
Bitcoin Cash was created in 2017 when the original Bitcoin was split into two parts. This was driven by worries among many Bitcoin owners about the direction that Bitcoin was taking. Congestion on the Bitcoin network was slowing down payments and creating a new layer of fees which went against the original spirit of Bitcoin.
Part of the problem was the capacity limits built in to Bitcoin’s design. To change this the creators of Bitcoin Cash needed to raise the level of the block limit that would allow the amount of data being processed to be carried out in bigger blocks. Bitcoin’s founders and early adopters worried that this would undermine the democratic character of Bitcoin and allow larger players like governments and banks to dominate the market.
Bitcoin Cash was therefore launched to satisfy the demands of owners who wanted to use Bitcoin as cash – to pay for transactions quickly. The division of Bitcoin Cash from Bitcoin, a process known as ‘forking’, has created a rival Cryptocurrency to Bitcoin that can accommodate faster transactions and higher volumes than traditional Bitcoin.
How to trade Bitcoin Cash
The price of Bitcoin Cash fluctuates on a daily basis, just like normal currencies. Another similarity with established currencies is that you can trade Bitcoin Cash 24 hours a day.
- Without owning: Profit from price volatility without the need for a digital wallet
- Volatility: Bitcoin Cash is a Cryptocurrency and like other Cryptocurrencies its price can go up and down
- Leverage: Traders use leverage to enhance the size of the profits they can make from the movements in Bitcoin Cash.
Using leverage to trade Bitcoin Cash can increase the size of your profits, but it can also magnify the size of your losses if you get it wrong. Because of the volatility of Bitcoin Cash, it is particularly important that you make sure you protect your positions on the downside, for example by using stop losses.
Buying vs trading Bitcoin Cash
Buying Bitcoin Cash means actually purchasing the currency, using a virtual ‘wallet’ to store your Bitcoin Cash. You can use Bitcoin Cash to buy real world goods and services like you would with other currencies. It can be hard to buy and sell Bitcoin Cash at very short notice, due to fees and sometimes unpredictable transaction times.
Trading Bitcoin Cash often requires short term buying or selling decisions. Actual Bitcoin Cash can be a bit too cumbersome for this. Instruments like CFDs allow you to trade the price of Bitcoin Cash without having to actually own Bitcoin Cash in a wallet. This allows you to take advantage of price changes very quickly, as you would trading other currencies.
Factors impacting Bitcoin Cash
Like many other Cryptocurrencies, the Bitcoin Cash value is heavily influenced by news flow around it. Many people who use Bitcoin Cash routinely use it simply as a currency and realise the practical benefits of making cross-border transactions without the fees associated with the alternatives.
But for investors it is important to see that Bitcoin Cash is being embraced by mainstream financial markets. News affecting Cryptocurrencies in general will affect Bitcoin Cash, but any take up of Bitcoin Cash by exchanges or financial institutions will have a positive effect.
Bitcoin Cash is also competing against Bitcoin – its founders are hoping that the systemic problems that affect Bitcoin will lead to more users turning to Bitcoin Cash.
Is Bitcoin Cash risky?
Bitcoin Cash is a volatile market and although this presents opportunities for traders it can also represent risks. Both buying and trading Bitcoin Cash involves risk.
- Bitcoin Cash has high volatility and sharp price fluctuations are very likely
- Leveraged trading can magnify both your profits and losses
The price of Cryptocurrencies like Bitcoin Cash can surge and fall dramatically and this represents one of the biggest risks to traders, the extreme volatility within Cryptocurrency markets. Cryptocurrency markets are currently much more volatile than almost any other market and when excess volatility crashes, you can be faced with significantly larger losses than you anticipate.
Because there are often a limited amount of reputable digital asset exchanges and no single reliable price source for Cryptocurrencies like Bitcoin Cash, this could, in theory, cause prices to tumble sharply. Bitcoin Cash is also a very new asset so we don’t yet know how it may perform in a major financial crisis.
It is also possible that certain governments may ban its citizens from holding Bitcoin Cash with the effect that the price may collapse.
Furthermore, there is a possibility for large scale cyber-attacks on digital asset exchanges which are likely to have a strong, short-term impact on the price of Cryptocurrencies.
Investors involved in trading Cryptocurrencies should also be aware of the potential for a so-called “51 percent attack”. A 51 percent attack refers to one centralized mining operation gaining over 50% control of a blockchain which would allow the operation to reverse transactions making the entire blockchain unusable.
If you have further questions about trading Bitcoin Cash, please see our Crypto FAQs
Bitcoin Cash price movements
As with other Cryptos, it is important to understand that the ‘rules’ affecting the way Bitcoin Cash is mined and processed can be changed suddenly, and this can have a big impact on the price, for better or for worse.
Cryptocurrency forking policy
In the event that the current cryptocurrency splits into two, new cryptocurrencies are created, this is known as a hard fork. We will generally follow the cryptocurrency that has the majority consensus of cryptocurrency users and will therefore use this as the basis for our prices. In addition we will also consider the approach adopted by the exchanges we deal with, which will help determine the action we take.
We reserve the right to determine which cryptocurrency unit has the majority consensus behind them.
As the hard fork results in a second cryptocurrency, we reserve the right to create an equivalent position on client accounts to reflect this. However, this action is taken at our absolute discretion, and we have no obligation to do so.
If the second cryptocurrency is tradeable on major exchanges, which may or may not include the exchanges we deal with, we may choose to represent that value, but have no obligation to do so. We may do this by making the product available to close based on the valuation, or by booking a cash adjustment on client accounts.
If, within a reasonable timeframe, the second cryptocurrency does not become tradeable, then we may void positions that had previously been created at no value on client accounts.
Over periods of substantial price volatility around fork events, and we may take any action as we consider necessary in accordance with our terms and conditions including suspending trading throughout if we deem not to have reliable prices from the underlying market.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.
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