Bitcoin Cash Fork Drives Crypto Volatility

Bitcoin Cash traded lower by 3.7 percent Monday after gaining as much as 40 percent over the weekend ahead of its upcoming hard fork expected to take place Nov. 15.

What Happened

Bitcoin Cash is the latest cryptocurrency to book large gains ahead of hard forks, splits in cryptocurrencies that happen when a blockchain is split into two paths that require software upgrades to follow the new path. A new currency is created following a hard fork, and owners of the original currency typically receive one coin of new currency for one coin of old currency.

On Friday, Binance and Coinbase announced they would be supporting the upcoming Bitcoin Cash fork, which triggered heavy buying in the market.

Why It’s Important

In the stock market, stock splits or dividend payments often reduce the value of the original shares of stock by dividing the cash balance, earnings potential and/or assets of the underlying company. Cryptocurrencies have no tangible value, earnings potential or asset backing, so their values are based solely on market sentiment and perceived utility.

Bitcoin Cash itself was created via a hard fork in bitcoin Aug. 1, 2017. The market cap of bitcoin is up 131.1 percent since just prior to the Bitcoin Cash fork, and the fork created a brand new Bitcoin Cash market now worth $9.62 billion.

What’s Next

Cryptocurrency traders will be watching to see how the newly-formed Bitcoin Cash variant will perform relative to its parent coin when the fork takes place in less than two weeks. Over time, longer-term investors will keep an eye on whether or not one or both of the Bitcoin Cash chains gain widespread popularity and could potentially pose a threat to leading cryptocurrencies bitcoin and Ethereum.

So far in 2018, Bitcoin Cash is down 74.4 percent. The Bitcoin Investment Trust GBTC is down 67.9 percent in 2018.

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