Bitcoin vs Bitcoin Cash: Fundamental and statistical comparison

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There is an ongoing fierce battle between Bitcoin and Bitcoin Cash since the inception of the Bitcoin Cash. Both digital coins are extremely popular among the crypto enthusiastic, both of them have many millions of followers, but there is a group of people, who just watch the competition between the two coins as simple outsiders.

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On the Bitcoin side you can count the 10 years long history, and it can be considered as uncrowned king of the digital currencies in the recent years. Since its introduction Bitcoin rules the crypto market and it has close to 70 % market share. And it looks like it will not change in the upcoming period.

On the other side the Bitcoin Cash supporters claim that they have much lower transaction fees and transaction processing time is significantly faster than the Bitcoin’s. Before we launch into the statistical comparison of the two digital currencies, let’s found out what happened during the most famous bitcoin hard fork in the history.

Born of the Bitcoin Cash

 

If we would like to learn more about the creation of the Bitcoin Cash, we have to fly back to 2017. That time the Bitcoin’s price floated around 1.000 USD, and the cooperation and harmony started to erode among the Bitcoin development team members. The network capacity was the biggest issue of the Bitcoin blockchain those times, because the given block size could not really handle the increased transaction numbers. The developers could not agree on the perfect block size for the Bitcoin network. The loyal developers of Bitcoin did not want to amend the block size, because smaller block size limits the possibilities of the DDoS attacks and it decreases the security risks. This concept however requires longer transaction processing time and it restricts the Bitcoin usability in the daily use cases. To resolve the issue the developers came up with two different ideas:

1. Bitcoin Unlimited – The Bitcoin Unlimited project developers proposed a concept, which would not define the exact block size in advance. In this case the miners themselves could define what block size they want to mine.
2. Segregated Witness (SegWit) – The SegWit concept resolves the issue of the network capacity increase in a way, that it separates the authenticated signature associated with transaction data, hence more space will remain in the block for the transaction data.

In the Consensus conference held in New York in May 2017 the SegWit proposal was accepted. According to the decision the protocol was applied immediately, and the size of the block was enlarged to 2 MB.

Some of the developers thought that SegWit was only a temporary solution, and it will not resolve the network capacity problems in the long term. One of them was Amaury Séchet, a former Facebook developer, who proposed to increase the block size from 1 MB to 8 MB in the summer of 2017. This proposal resulted the launch of Bitcoin Cash in August 2017.

Pros and cons of Bitcoin Cash

The main benefit of Bitcoin Cash is the cheaper and faster transactions. The BCH developers are working continuously on the improvement of the coin scalability, which ensures the usability and spreading in the future. Due to the mentioned advantages Bitcoin Cash is widely accepted in the retail stores as well.

The disadvantage of the BCH is coming from its short, 2 years history. The larger investors prefer to buy Bitcoin due to the bigger trust in the coin, hence cryptocurrency exchanges and trade desk are dominated by Bitcoin. Additionally, the Bitcoin Cash popularity is lower, it has less followers than the primary coin, which slows the Bitcoin Cash propagation.

Pros and cons of Bitcoin

As we mentioned earlier, Bitcoin has almost 70% market share and it totally dominates the cryptocurrency market. If we add the fact, that Bitcoin was the creator of the whole cryptocurrency world, and it has the largest group of supporters, it is clear, that no competitor match with Bitcoin.

However Bitcoin is far from perfect. Those problems, which caused the introduction of Bitcoin Cash, still exist in the Bitcoin network. Since the last Bitcoin fork, it achieved significant developments, but the scalability issue causes significant headache for the Bitcoin developers nowadays as well.

Statistical comparison of the BTC and BCH

Based on the above analysis we could argue till the end of the day, which digital coin has brighter future. To avoid this dilemma, let’s compare the performance of two coins based on objective data.

Price correlation

First basic thing we can claim about the altcoin prices is that is follows the Bitcoin exchange rate. The correlation between the prices of Bitcoin and altcoins can be negative and positive as well between the range -1 and 1. Of course, the correlation of Bitcoin is 1 as Bitcoin itself is the basis of calculation. Tether has correlation value 0, and Bitcoin Cash correlation is in range between 0.65 and 0.86 in the given period. This value is relatively high compared to other altcoins (Ethereum 0.44, Litecoin 0.19, Cardano -0,34), which means that Bitcoin Cash price closely follows the Bitcoin price.

Concentration of coins

In the recent years several times popped up the question of price manipulation. We cannot really respond to this question with complete certainty, however we can analyze the trade volume, and who is participating in those trades. We can differentiate three main actors in the market:

Whales – investors, who own more than 1% of the supply turnover
Investors – who own between 0.1 -1% of the supply turnover
Retailers – who own less than 0.1% of the supply turnover

This distribution was created based on the sizes of the wallet addresses, which must not show the real market presence absolutely, because one investor can own several wallets.

Based on the chart we can conclude, that retailers generate almost 90% of the daily trading volume in case of Bitcoin. On the other hand, whales have significant contribution in the BCH trading. Finally, it means, Bitcoin price is more resistant to price manipulation due to the high retail participation (90%) in the daily trading volume.

Long-term investors

If we analyze the wallet addresses, we can learn, how many addresses exist, which were not touched by the owner more than one year. This data shows us, whether the investors trust the digital coin in the long term. High number of untouched wallets indicates high trust in the bright future of the digital coin.

As the chart shows, the addresses owned by long term investors increased from 11 million to 16.6 million in the last year, which indicates that many investors consider Bitcoin as part of their long term investment portfolio. This number remained unchanged in case of Bitcoin Cash. It means, that Bitcoin Cash is relatively young digital coin, and trust requires more time to build upon.

Final conclusion

As we stated earlier, both digital currencies have their pros and cons. If we consider the trading volume generated by market players and number of long terms investors, Bitcoin seems to be a better investment opportunity. However we must highlight, that Bitcoin Cash is only two years old coin, and sooner or later the whales and large investors will move away from it, hence the risk of price manipulation will be reduced. Then Bitcoin Cash can achieve similar good performance results as Bitcoin does nowadays.

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