A new version of Bitcoin – known as Bitcoin Cash – launched last week and, within 24 hours, became the third biggest digital currency of all time.
The breakaway version of the cryptocurrency was set up by a group that runs the software behind bitcoin using a process known as a ‘fork’.
There were early concerns that the introduction of Bitcoin Cash would have a detrimental effect on the price of the original but the opposite has happened. Over the weekend, Bitcoin surged above $3,000 to reach a new all-time high. It peaked Saturday at $3,360.87 before dropping slightly to $3,286.87. This gave Bitcoin a market cap of $53.4 billion. At the time of writing, it’s worth $3257.17.
This surge represents a jump of more than 10% over the past week, after an initial 5% drop when Bitcoin Cash launched and subsequently confused markets. Rival digital currency Ethereum similarly saw surging prices over the weekend, jumping 12% on Saturday and a further 7% on Sunday, to $270.07.
By comparison, despite Bitcoin Cash’s early rise, the new currency plunged to below $300 on Friday (down from $727). It’s now worth $264.
The split was a result of unrest in a section of the digital currency community. Members were unhappy about the 1MB block size limit slowing transactions, leading to infuriating delays. Bitcoin Cash added a number of new features, including a block size limit increase to 8MB and a new way of signing transactions, to solve this frustration.
As a result, Bitcoin’s blockchain – the digital ledger that records all transactions – was forced to split into two different chains meaning everyone who held bitcoins before the split were eligible to receive the same amount of Bitcoin Cash tokens. This is at least partially responsible for the initial Bitcoin Cash spike.
“There’s no infrastructure available out of the box, to support BCC [Bitcoin Cash],” Fran Strajnar, co-founder and CEO of data and research company Brave New Coin told CNBC. “The network needs further support and infrastructure needs to be as easy as Bitcoin; otherwise it’s over for BCC.”
Coinbase, the world’s biggest bitcoin exchange, initially said it was not supporting Bitcoin Cash but later backtracked. It told customers via email that it would introduce “support” for Bitcoin Cash by 1 January but would not commit to whether it would trade the cryptocurrency. Until support rolls out widely, people who maintain a wallet on Coinbase will be unable to access their new alt coin cash. Inevitably, Coinbase users are angry with the decision, which could lead to legal woes for the company, despite the change in stance.
Like most things in the cryptocurrency world, no-one really knows what’s going to happen with Bitcoin Cash in future, but many believe that users will sell their new digital currency as soon as they can.