Bitcoin Cash: Trash

by: John Lohr

Summary

So, there's a new junkyard dog on the Bitcoin block.  Let's see how long before it gets returned to the kennel.

Bitcoin Cash, either a spin-off or a knockoff, hit the street last Tuesday and the skids last Friday.

There's more uncertainty than a Twin Peaks episode, and that leads to some fundamental questions without cryptocurrencies.

The headline read “Bitcoin split into Bitcoin and Bitcoin Cash” Tuesday (8-1-2017). A casual investor might read that like a stock split or something. No. The Bitcoin Cash website said the birth of Bitcoin Cash was “a clean break”. So, is it a split or is $BCH an “upstart rival”. That answer is “yes”, depending on who you read.

$BCH thumped its chest: “low fees, reliable confirmations”, and a bunch of normal Cryptohype: “unrestricted growth, global adoption, permission-less innovation and decentralized development”. Bitcoin owners who apparently received an equal amount of BC took to Twitter:

“u can't move it

u can't sell it

no, it's not a rock, it's $BCH!"

As it came to market, it claimed to have a “Market value” of more than $5 Billion.

Samson Mow, a video game developer and CEO of Pixelmatic, said the market, as a result, is completely illiquid. (Sellers have no buyers.) ”The market for [bitcoin cash] is so illiquid and fragmented that the price, and by extension the market cap, mean almost nothing," Mow said. In other words, the only reason why bitcoin cash is trading at anything is that the $BCH price is propped up because the marketplace can’t move their coins.

Crypto Exchanges Coinbase & GDAX said they will accept $BCH, BUT there can be no access to them and no trading until January 2018. Until such time they are “safely storing” $BCH for owners. Uh Huh.

What do you think happens when $BCH holders are able to finally able to access their “money”? And what happens to a price when there are more sellers than buyers?

Uncertainty drove prices wild last week. $BCH opened Tuesday around $200 (we think), soared to $700 Wednesday and crashed to $287 Friday. If there is no liquidity, is there any validity in a “market price”?

Adding to the confusion, some bitcoin owners didn’t know or didn’t care that there was a new dog on the Bitcoin block. Malaise was attributed to language confusion or disinterest. A popular Bitcoin Blog answered the fairly simple question, “Are exchanges supporting Bitcoin Cash with “yes”, “no”, “potentially not at a 1:1 rate” and ”not at fork time”, all in the same answer. A cryptocurrency writer who knows a gazillion times more about them than I do said, “At the end, who got what? Like many things in the cryptocurrency space, that answer is unclear.”

Which leads me to the bigger picture:

Are cryptocurrencies like Bitcoin or $BCH actual “currency” or a “medium of exchange”? Accepting Investopedia as a primary source (hard to do for some) the correct answer is “neither”. Their definitions are: “Currency is a generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy.” Nope. “A medium of exchange is an intermediary instrument used to facilitate the sale, purchase or trade of goods between parties.” (So far, so good). “For an instrument to function as a medium of exchange, it must represent a standard of value accepted by all parties.” (Uh Oh). Giving owners of BC the benefit of the doubt, maybe owners of the item regard it as both, but non-owners do not.

Japan and Australia now accept Bitcoin as a legal method of payment, which runs exactly counter to one of the main reasons some owners tout BC: “governments can’t control it”. Then, WHY do they have to approve it? As one of my commenters said on my last article about Bitcoin, “There is nothing which is totally immune to government manipulation.”

Are cryptocurrencies worthy investments? Not as such, no. They are speculation plays, not investment strategies or even completion strategies. Not every portfolio should have some. Some of those same commenters about Bitcoin a couple months ago admitted they might buy some with their “play money”.

Yes, but please not in your IRA or 401(k).

If you just feel that you have to own Bitcoin or $BCH or some other crypto, read an article from last week by Eli Afram on CoinGeek. He analyzes the whole Bitcoin/Bitcoin Cash phenomenon. If you understand ALL of that article, then you should buy some.

As for me, I’m 72. I won’t be here to see the apocalypse or the ascendance of Cryptos—whichever.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.