Trading Bitcoin Cash
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.
- Go long or short: Bitcoin Cash prices go up and down against other currencies like the US Dollar, allowing traders to make profits from falling as well as rising prices.
- 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.