A few hours after its first halving, the price of Bitcoin Cash fell. Below is an answer to why this situation occurs and whether or not this event should be.
Bitcoin Cash, the most important fork of Bitcoin, the 5th in the ranking of the largest by market capitalization, witnessed its Halving last April 8th. Even though many people consider it a positive event, its price has dropped a little.
Behavior of Bitcoin Cash on April 8th
Between March 12th and April 8th, BCH managed to increase its price by almost 100%.
At the time of writing this article, sellers have momentarily taken control, dragging the price toward USD 263, eliminating much of the profit after reaching a daily high of USD 280.
However, intraday time frames, mainly the 4-hour time frame, allow observing a bullish trend. This could be a setback to continue the upward structure that is still in force.
Buyers have been able to overcome strong resistance, but USD 275 was a good hurdle. If bulls manage to break it down, the path towards USD 300 will be completely clear.
The moving averages on the 4-hour candlestick chart support the bullish short-term outlook for the Bitcoin Cash price.
The exponential moving average (EMA) of 8 and simple moving average (SMA) of 18 are crossed to the upside, functioning as an excellent dynamic supports amid the price rise.
The 200 4-hour SMA is also bullish and its break has meant strong control by the purchased side in the short term.
In the daily candlestick chart, the view changes a little, since it is possible to see how the largest structure is still bearish. What currently seems to be a recovery may mean a deep setback for a subsequent bearish momentum.
At the time of writing this article, the Bitcoin Cash price is struggling with the important 200-day SMA, the current resistance. This also converges with the 61.8% retracement level of Fibonacci, so sellers may be about to take control.
Abrupt Drop in Price
Halving is the reduction by half of the speed of issuance of the remaining coins, as well as the reward per solved block.
The same as will happen with Bitcoin, the BCH blockchain will reduce its production of units from 12.5 to 6.25 per block. This adjustment should logically be positive in the long-term for the Bitcoin Cash price if there is an increase in the demand.
In case it does not occur in that way, BCH miners will need to increase transaction fees in the long term, as a result of possible losses from the block reward decrease.
Bitcoin Cash is attractive to many people because of its 32mb block size. This feature allows making more transactions per second than with its parent, which has a maximum block size of 1 mb.
However, this should not be the only thing for people to trust a project like this. Its development could stagnate as the adoption is not enough to continue. Meanwhile, those supporting the network (miners) find it more difficult to work in it.
BSV First Halving
The Bitcoin SV code, offspring of Bitcoin Cash, also underwent the Halving protocol.
Its developer, Brad Jasper, indicates that the halving event will be negative in the short term, even for BCH. He expects miners to temporarily migrate to more profitable chains.
However, he thinks that their utility will prevail in the long term, mainly due to the priority that these projects give to transaction capacity.
By Alexander Salazar