The Bitcoin Cash (BCH -0.84%) cryptocurrency bills itself as a system of "peer-to-peer electronic cash."
That vision carries subtle but important differences from Bitcoin, where the battle cry is "a new kind of money." Bitcoin offers payment services but mainly wants to store and protect your wealth in the long run. Bitcoin Cash started from the same code base but tweaked a few parameters to speed up its transaction processing. So Bitcoin wants to be a solid tool for generic money management. Bitcoin Cash serves as a nimbler payment processor, with less long-term stability and a potentially weaker data security model.
With this transaction-friendly focus, it should come as no surprise that Bitcoin Cash is more volatile than Bitcoin. For instance, the smaller and swifter cryptocurrency has doubled its price in 2023 while Bitcoin gained 55%. At the same time, the current price of $199 per Bitcoin Cash token is far from the three-year high of $1,547.
Is the recent price surge a sign of better times ahead, or is the slumping long-term trend a more accurate predictor? Will Bitcoin Cash ever be worth $1,000 per token again?
Bitcoin Cash creates value when people use it in the real world, or take steps toward widespread use of its payment services. The cryptocurrency has indeed seen some good news recently.
- A consortium of financial service giants, led by Charles Schwab and Fidelity, fired up a brand new cryptocurrency exchange in June. The EDX Markets exchange launched with support for four hand-picked cryptocurrencies, and this elite list includes Bitcoin Cash. As a result, Bitcoin Cash's token price nearly tripled in a week as investors digested this strong vote of confidence.
- Recent rulings in a couple of important lawsuits imply that Bitcoin Cash should be seen as a cash-like commodity rather than a regulation-laden security. Nothing is set in stone yet, and the legal wheels of appeals and jury trials will probably keep turning for years before the regulatory framework is finalized. But baby steps in the right direction still count as moving forward.
- The crawl toward a more stable crypto-trading future has inspired several investment management titans to consider making Bitcoin-based exchange-traded funds (ETFs) available on the open market. The list of potential ETF issuers is a who's who of investment services. Cathie Wood's Ark Invest has a filing in play. BlackRock is the world's largest financial manager with $9 trillion of assets on the books, and another current Bitcoin ETF application. If the SEC ever approves one of these filings, the floodgates will open for all sorts of cryptocurrency ETFs -- including Bitcoin Cash. That potential sea change is important because the funds would pour massive amounts of cold, hard cash into the crypto sector.
A couple of thorny questions must work out in Bitcoin Cash's favor before the cryptocurrency can soar to $1,000 per token again.
First, the progress toward a serious legal and regulatory crypto system must continue. Stalling out for years could bring Bitcoin Cash back to square one in many ways. Second, crypto-based payments need to become more common. Third, it would be great if Bitcoin Cash could become the most popular blockchain platform for high-speed payment transactions, though simply landing among a handful of standard options could be good enough.
Can these crucial chips fall the right way? Yes, of course. But there is no guarantee that they will -- and even if they do, Bitcoin Cash may not survive a long and slow process. This cryptocurrency has market momentum on its side right now. It would be a shame to waste it.
Bitcoin Cash is making progress, but this digital coin is still far from the go-to solution for digital payments. Bitcoin remains the most widely accepted crypto payment option in the real world, followed by Ethereum and Litecoin. If you're dealing with international payments, XRP also enters the conversation before Bitcoin Cash. Maybe that's good enough to jam a foot in the market door for the long haul, and maybe it isn't. Time will tell.
So Bitcoin Cash might be able to regain the lofty $1,000 price point again, but that target looks distant today. You should buckle down for a bumpy ride, keep the investment size modest due to the substantial risks along the way, and be prepared to lose it all if something goes wrong. It's a high-risk, high-reward situation. Make sure you can live with that before putting real money into Bitcoin Cash.
Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Anders Bylund has positions in Bitcoin, Ethereum, and XRP. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool recommends Charles Schwab and recommends the following options: short September 2023 $47.50 puts on Charles Schwab. The Motley Fool has a disclosure policy.