Why You Should Consider Investing in Bitcoin Cash
Bitcoin Cash is the fourth largest cryptocurrency by market capitalization. That means it is already well known by investors around the world – which is a big advantage in a market with hundreds, if not thousands of alternatives to choose from.
While Bitcoin Cash is very similar to the original Bitcoin, it has been enhanced to make it a better cryptocurrency for every day transactions. While many investors view Bitcoin as the digital equivalent of gold, Bitcoin Cash is a digital version of currencies that are used to make small, frequent purchases.
Bitcoin, the largest cryptocurrency, is viewed as a store of value. Ethereum, the second most valuable crypto asset is a utility token which gives holders access to a decentralised network of computing power. And, Ripple’s XRP, the third most valuable crypto asset was created for banks to transfer value around the world. Bitcoin Cash, ranked number four, is designed for small transactions and payments.
Bitcoin Cash is therefore the leading contender for widespread adoption as the digital money of choice for frequent transactions. The only other crypto asset ranked in the top ten most valuable and designed for the same purpose is Litecoin, which has less than half of the value of Bitcoin Cash.
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A Brief History of Bitcoin Cash
Bitcoin Cash emerged from a hard fork of the original Bitcoin blockchain in August of 2017. A hard fork occurs when the original code for a cryptocurrency, along with the history of all the transactions is copied and then altered slightly to create a new crypto asset on a new blockchain. The two currencies then have identical blockchains up until the fork occurs, after which they have their own chains.
The fork occurred due to disagreement amongst the developers and miners working on the Bitcoin blockchain. For a number of years, the community had been debating the best way to address the issue of scalability and transactions on the original chain. Because the blocks that make up a blockchain have a specific size, only a certain number of transactions can be processed in a given time.
One way to increase the transaction processing speed is to increase the block size, while the other is to allow small transactions to be executed away from the chain and added later in bulk. When the network began to become congested in 2017, most of the community agreed to allow off chain transactions. However, a small number of developers decided to start a new chain with larger blocks, and hence Bitcoin Cash was born.
Bitcoin Cash Versus Bitcoin Core
It’s worth knowing some of the differences between Bitcoin and Bitcoin Cash before investing in either (or both). There are two primary differences between the two.
Firstly, while Bitcoin has a block size of 1MB, Bitcoin Cash has a block size of 32 MB, meaning far more transactions can be processed. So far, the larger block size hasn’t mattered because there are not enough transactions on the Bitcoin Cash network. However, if more people were to use both currencies to make lots of small transactions, like buying a cup of coffee, the difference would be significant. In that case the Bitcoin network would become very slow, while Bitcoin Cash would handle the increased volume.
The other major difference, is that Bitcoin has incorporated a technology called Segregated Witness, or Segwit2x. Segwit2x removes the signature information for each transaction from the blocks and instead records them in a separate extended block. This allows more transactions to be included in each block and speeds up the transaction speed in the process. It also allows off-chain transactions to be conducted between users.
The developers who support Bitcoin Cash believe that SegWit2 compromises the integrity of the network, which is why they chose larger blocks instead.
Choosing A Cryptocurrency Exchange
Now that you know a little about Bitcoin Cash and how it differs from other cryptocurrencies we can get back to the subject of how to buy Bitcoin Cash in US.
Cryptocurrencies can be bought in three ways; through exchanges, through brokers and privately between two parties.
We will discuss brokers in the next section. Now, there is nothing to stop you buying Bitcoin Cash from someone else who wants to sell it to you. The problem is you first have to find a seller, and that’s why exchanges exist. Cryptocurrency exchanges exist to bring buyers and sellers together.
There are now hundreds of cryptocurrency exchanges around the world, but if you are based in the US there are several advantages to using a US-based exchange. Firstly, a US-based exchange is more likely to accept USD. If you trade on an exchange elsewhere, you may have to first buy GBP or Euros, and of course, that will add another layer of fees.
The other reason is that regulations may change in the future which will make it tricky to have your Bitcoin Cash on another exchange. Right now, it’s fine to use exchanges overseas, but if the rules change regarding tax or anything else, it will be a hassle to use those exchanges
In the next section, we explain how to invest in Bitcoin Cash through brokers instead of exchanges.
What’s the Difference Between a Broker and An Exchange?
When you invest in stocks you trade through a broker, and the trade gets executed on an exchange. In the world of cryptocurrencies, things are a little different. Because the market is not regulated in the same way, and because cryptocurrencies are designed as a peer-to-peer currency, the structure of the market is very different.
As mentioned, you can trade cryptocurrencies directly between yourself and another person, but finding that person may be a problem, and that’s why exchanges exist. But you can also trade via a broker who will either match the trade elsewhere or find a seller for you.
Brokers often also give buyers the opportunity to buy cryptocurrencies on margin, or buy a CFD using margin. In the case of buying Bitcoin Cash on margin, your broker is effectively lending you money and using your margin as collateral.
CFDs, or contracts for difference, are a type of derivative that allows you to participate in the price move of an asset like Bitcoin Cash, without actually owning the asset itself. CFDs are often cheaper to trade than the actual asset, although the disadvantage is that you can’t move the asset to another wallet or exchange.
When choosing the best crypto broker, it’s worth considering that some exchanges and some brokers allow you to move Bitcoin Cash to other wallets, while some brokers don’t. in the case of a CFD, you cannot move your position from the broker.
How to Fund Your Cryptocurrency Account
One of the factors that you’ll need to consider when buying Bitcoin Cash, is the way you’ll fund the purchase. Firstly, you might be using fiat cash, or you might be using another cryptocurrency?
When you do an exchange or crypto broker comparison, find out what methods you can use to fund your purchase of Bitcoin Cash. For a start, some exchanges only accept other cryptocurrencies – which is fine if you already own another digital currency. However, if you’re using cash, and specifically United States Dollars, you’ll need to find an exchange that accepts USD, or use a broker.
Most exchanges only accept EFTs, bank wire transfers and payments via services like PayPal, Neteller and Skrill. Brokers, on the other hand, will usually accept payments via credit cards and debit cards too, though this varies from broker to broker.
The last thing to check is whether there are charges to make deposits and withdrawals, and how long those transactions take. Once you have determined all these factors, you’ll be in a good position to decide and choose and broker or exchange.
So, when considering how to buy Bitcoin Cash in US, find out which exchanges and brokers will allow you to fund your account using your preferred method. In the next section, we explain how to invest in Bitcoin Cash using different strategies.
When to Buy Bitcoin Cash
Timing your purchase of Bitcoin Cash really depends on your time frame and strategy. There are four basic crypto trading strategies that you might want to consider for Bitcoin Cash.
Firstly, you can buy for the long term, or HODL as members of the crypto investing community refer to long term investing. If you believe Bitcoin Cash will see widespread adoption in the coming years this is a great strategy, and you don’t have to try to second guess each price swing.
Secondly, you can buy into weakness, and sell when the price appreciates. This strategy takes advantage of the volatility in crypto markets but is difficult to execute in reality. It can be very time consuming too.
If you think there may be a long-term rally in the price of Bitcoin Cash, you may want to wait for the price to break out of a trading range or make a new high. Some traders use the 10-week high as a benchmark and wait for the price to break that level. That means that as long as the price remains in a downtrend, or range-bound you can stay on the sidelines, but if there is indeed a long-term rally, you won’t miss out.
Finally, you can also compare the price of Bitcoin Cash to that of Bitcoin, and buy it when the ratio is lower than average, or sell when the ratio is higher than average.
How to buy Bitcoin Cash in the US
When we explain how to invest in Bitcoin Cash, and specifically how to buy Bitcoin Cash in US we like to cover all the bases.
Your first decision will be if and when to invest in Bitcoin Cash. You now know that it is the most valuable, and therefore popular cryptocurrency for everyday transactions. While Bitcoin, Ethereum and Ripple are the market leaders in their own niches, Bitcoin Cash is the preferred choice for a digital currency for making frequent transactions quickly and cheaply. It came into existence because certain developers and miners felt that Bitcoin was going down the path of a digital gold rather than a useful means of transferring gold.
To buy Bitcoin Cash in the US, you’ll need to choose a broker or exchange that accepts USD and that accommodates your preferred method of funding an account.
Finally, you’ll need to decide on a strategy. Are you a long-term holder, or do you plan to trade Bitcoin Cash and use the volatility to your advantage? As a long-term holder, you may want to exchange so that you can transfer your holding into your own hardware wallet. On the other hand, if you decide to trade the volatility, you may wish to use a broker and trade on margin or trade CFDs that offer leverage.