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How to Invest in Bitcoin Cash

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Investing in Bitcoin Cash

The altcoin market can be quite complicated. Not only are there thousands of cryptocurrencies that aren’t Bitcoin, but there are a slew of tokens that are identified as ‘Bitcoin-something’ without actually being Bitcoin. 

They’re basically off-brand tokens that are cheaper but almost the same, or at least they claim to be.

The question that arises, then, is whether these altcoins are worth it or not.

This is particularly difficult to know on decipher at a first glance, since it’s easier to think you might be better off purchasing Bitcoin instead.

But as new investment sphere, there’s a lot to learn about cryptocurrencies, and it’s easy to doubt when you know just a bit.

To help with those doubts, we have written this guide.

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What is Bitcoin Cash?

Bitcoin cash is one of the many Bitcoin-based altcoins. 

While altcoins is the term used to call cryptocurrencies that aren’t Bitcoin (the original one,) Bitcoin-based means exactly that: These altcoins aren’t separate, independent projects.

Instead, the code they rely on and most of their design comes directly from the original Bitcoin code.

In the crypto community, they’re also often called Bitcoin forks, since they are effectively alternate paths taken during the development and history of Bitcoin that led to separate cryptocurrencies.

Bitcoin Cash is one of the most commonly advertised Bitcoin forks.

It has maintained popularity over the years, and it’s generally seen as a decent investment: Not too risky, yet not likely to yield huge gains in the short term either.

As such, it is indeed often recommended to newcomers.

How does bitcoin cash work?

Being based on Bitcoin, BCH works in the very same way Bitcoin does: It's blockchain works just as a ledger for transactions and nothing more (i.e., there’s no support for smart contracts or dApps, and the blockchain exists solely to maintain the cryptocurrency;) block authentication is done using a proof-of-work algorithm, which allows people to mine it; and there’s a supply limit to how many tokens can ever exist.

Bitcoin Cash is, therefore, just a cryptocurrency. It has no bells or whistles, and it exists just for the sake of itself.

It chases the original idea of BTC, where cryptocurrencies were thought to exist simply because people would use them, without giving the blockchain some extra uses.

Bitcoin vs. Bitcoin Cash

Bitcoin vs Bitcoin Cash

That doesn’t mean there are no differences between these two cryptocurrencies, however.

Hard forks are born out of disagreements within the community, and therefore there have to be differences between them.

First, there’s the obvious difference, which is its value.

None of the Bitcoin forks have managed to attract the market share the original cryptocurrency has, and as a result, they all are worth but a fraction of their older brother.

This is seen as both a pro and a con, depending on who you ask, but the fact is that none of the BTC forks is worth even half BTC’s price.

Then there are the few, but still considerable, technical differences.

These are the more important ones, since they stem from the disagreement that led to the fork, and arguably make the forked cryptocurrencies a better offering for the crypto market.

In Bitcoin Cash’s case, the main difference is block size. A block, in cryptocurrencies, is a package with several transactions to be authenticated by miners.

A larger block size (8MB, from Bitcoin’s 1MB) is Bitcoin Cash’s way of dealing with the Bitcoin Scalability Problem, which has been one of the biggest hurdles cryptocurrencies have ran into in the road towards mass adoption. 

Naturally, Bitcoin Cash’s larger block size doesn’t solve the problem, but it makes it much smaller in comparison.

The second technical difference is smaller.

Bitcoin’s proof-of-work algorithm states that newer blocks to be mined will always require more work than previous ones, with the difficulty doubling over a certain count of blocks.

Bitcoin Cash, in an attempt to keep the mining economy going, instead scales the difficulty of block mining in real time, based on the number of miners available.

This smaller change might seem frivolous and aimed only towards miners, but in truth, it also helps the blockchain itself.

Transactions are only verified once a block is mined, after all, so a dynamic difficulty algorithm allows for BCH’s blockchain to optimize itself so that transactions are always authenticated in a relatively short waiting time.

4 Reasons to own Bitcoin Cash

Now that we have gone through the reasons why Bitcoin Cash exists and the main differences it has when compared to Bitcoin, it should be pointed out that there are indeed reasons to own this altcoin, even if it doesn’t have a huge market share and even when it won’t make you an overnight millionaire.

Faster processing rate

The first reason to own Bitcoin Cash instead of Bitcoin is, naturally, the very reason that led to the hard fork and the creation of the altcoin.

While nobody has cracked the scalability problem yet, Bitcoin Cash has a much-optimized mining and verification algorithm that allows it to process many more transactions in a much shorter time.

This puts it in the forefront among Bitcoin forks, making it one of the preferred tokens were Bitcoin or one of its related coins to attain mass adoption.

However, there’s a warning to be had here – while Bitcoin Cash is much faster than Bitcoin, it’s hardly the fastest cryptocurrency around.

Newer blockchains have been developed with the specific aim of fixing the scalability issue.

These newer projects often boast transaction capacity and times that outperform both Bitcoin and its forks by a decent magnitude, with some claiming to have the ability to process just as many or more transactions per second as Visa and Mastercard do.

Secure

Bitcoin Cash is widely considered as secure as its parent blockchain. Considering Bitcoin (and by extension, Bitcoin Cash) has never been hacked in the decade since its original implementation, this gives it a perfect security rating.

One thing that should be noted, however, is that while Bitcoin Cash has never been hacked, certain voices in the community worry about its security.

This worry comes from its main advantage versus Bitcoin: the block size.

Bitcoin’s smaller block size means transactions need to be authenticated in smaller chunks, making it more difficult for fraudulent transactions to pass- thanks to the consensus mechanism. 

A larger transaction amount per block means that, were a takeover over a cluster of nodes to succeed, the hackers would have control over many more transactions, thus increasing the inherent risk.

Still, since so far neither the BTC nor the BCH blockchains have been hacked, in practice, both are just as secure.

The worries come from the ongoing discussion in the community of speed vs security – slower systems are considered more secure, but at the cost of speed and processing power.

Low fees

One of the commonly quoted reasons why cryptocurrencies are said to be unviable by detractors are transaction fees.

Said fees are usually variable, depending on how congested the network is at the time.

Some publications have said the transaction fees for certain cryptocurrencies, like Bitcoin, is often of several dollars – and in some cases, figures in the dozens of dollars per transactions have been mentioned.

Needless to say, fees so high are extremely uncommon and, while not impossible as per Bitcoin’s protocol, such levels have only been reached a couple times in the cryptocurrency’s history.

Yet, if fees can be a problem for Bitcoin, it’s not so for Bitcoin Cash. It's design, allowing for more transactions to take place at a time, makes said transactions not only faster, but also cheaper.

Add to this the lower value of BCH when compared to BTC and you get a Bitcoin fork whose average transaction fee during 2018 was below a cent.

Hardly something to complain about and lower than what any bank would charge.

Reliable

The changes made to the Bitcoin Cash blockchain when compared to the original Bitcoin one made the newer cryptocurrency more reliable.

Shorter transaction times, less volatile prices, and smaller transaction fees translate to a cryptocurrency that could be used for everyday transactions without having to worry about checking the current going price of the currency and its transactions beforehand.

Another detail that lends reliability to Bitcoin Cash is its' spotless security record.

Although permanent uptime is a common feature of all blockchains, some have on occasions been hacked into or brought down with distributed attacks.

That’s not the case for BCH, which hasn’t been down ever in its history.

How to invest in Bitcoin Cash

As with all investments, just purchasing the token or shares is only the first step.

In order for an investment to succeed, you need to have an investment plan: That is, an outline of how you are going to work the market to your favor.

This plan will change depending on your personal goals, and even after you’ve decided on one, the market’s own volatility might force your hand into switching to another one.

The idea of having a plan is simply having an outline, or a set of rules, telling you how to react to the market.

Don’t be afraid of changing it if need be.

Short term trading

One of the most common ways of trading cryptocurrencies consist in buying and selling them in short timeframes, profiting from the constant peaks and valleys they go through.

The length of these timeframes depend entirely on you: Some people like waiting a few days, particularly when a token is steadily going up, in an attempt to maximize earnings.

Others go for the more extreme method, called day trading, which is buying and selling a cryptocurrency (or company shares) within the same day – in much the same way forex trading works.

Day trading is very difficult to master, as it requires you to have a nearly flawless ability to predict the market’s short-term changes, and a misstep can be catastrophic.

Some investors do an even more extreme version of it, called leveraging, where they borrow money from a lender to use on day trading.

The amount of money they receive is based on how much of their own money they will be investing (the leverage,) and the contracts state that if markets go down the investor must jump out as soon as his own funds have been lost in order to recoup the lender’s money.

While leveraging naturally increases the earnings from day trading exponentially, it also increases the risks tenfold, making it the most extreme type of crypto trading available in the marketplace.

Day trading in general is already risky and difficult, with paper-thin profits most of the time.

Doing so using leverage is something only experts should ever consider.

Buy and hold

A more popular and calmer method of investing is simply, as its name states, buying and holding crypto tokens.

Buy and hold is the default strategy to investments in general, since it uses the “buy low, sell high” motto and applies it to mid-to-long term changes.

Most of those who became overnight millionaires during the Bitcoin bull market of late 2017 did so precisely by following this – they bought, or alternately mined, Bitcoin many years earlier when the token was worth but a handful of dollars, and then kept the tokens stashed away as an investment.

When the prices started going up, they started looking for the right moment to jump out of the market.

Many people jumped out when the price reached $15,000, because a crash was quite easy to predict at that point.

The fact that so many people sold their BTC then because of an oncoming crash naturally only made said crash even worse than it would have otherwise been.

Buy and hold is, then, a long-term investment strategy.

You shouldn’t expect it to give you any earnings in the short term, and being too quick to sell (either due to peaks or valleys in the price) is likely to end up in losses, but if you play the game well enough, you might see decent earnings in the long run.

Invest in your IRA

The third most common type of crypto investment is one for your future: Your retirement funds.

For your IRA, you usually want a varied portfolio that contains not only several types of investments, but also different goals with them.

You’ll want to have some investments that are likely to greatly appreciate in the long term, but you’ll also want to have some safer investments that are sure to keep their value relative to inflation – investments that are much less volatile, where your money doesn’t run the risk of evaporating overnight.

All cryptocurrency investments, sadly, fall in the former category: They have the potential of returning huge earnings, but the market is always volatile and there’s a chance any one token might become worthless overnight.

Some tokens are considered safer than others, of course, but there’s no such thing as a safe crypto investment.

Therefore, any crypto investments you make will be better suited to the “somewhat risky, but might make me earn big” group of your IRA portfolio.

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How to Buy Bitcoin Cash

Bitcoin Cash is one of the easier crypto tokens to buy.

While not the largest in the market, it is supported and traded by many exchanges, making it possible for investors to get it wherever they feel is more convenient.

One of the easier exchanges to use is Coinbase, a beginner-friendly, secure exchange that’s among the most-used crypto exchanges in the world.

In order to purchase Bitcoin Cash from there, a few simple steps must be followed.

Step 1: 
Register a Coinbase Account

The simplest step. You’ll only be asked for an email address and a password (make sure to use a secure one.)


This is a common thing among crypto exchanges: Usually, only a minimum amount of personal information is required to create your account.


Most of them, however, do ask for personal information later on, when they ask you to verify your account.

Step 2: 
Go through account verification

Coinbase has three levels of verification, and what you’re allowed to do on the platform depends on the level you’ve attained.


While just level 1, which requires only your phone number, allows you to trade, you can’t cash out without having at least attained verification level 2 – which adds personal information, including proof of residence, to the mix.


Verification level 3 is only required if you plan on withdrawing your cryptocurrency to a crypto wallet. For this last step, you’ll be asked for a photo ID.

Step 3. 
Add your payment method or funds

From your dashboard, select Payment Method, then Add New Account to add your bank account.


Then, proceed to fund the account so you can later purchase your Bitcoin Cash.


For credit card payments follow the same steps, although you won’t be required to add funds since credit cards are simply charged when the transaction takes place.

Step 4: 
Buy your crypto

Go to the “buy/sell” tab and you’ll see a list of trading pairs being offered.


Scroll through it until you find the one that says BCH/USD, or BCHUSD, which means trading BCH in exchange for USD. Select it, and you’ll be shown detailed going prices for the crypto in USD.


Then input the amount of BCH you want to purchase and go through checkout.


Depending on your payment method, the transaction might take a few days to clear –however, the price is locked the moment you place the order, so don’t worry about BCH values spiking and making your purchase more expensive.


Credit and debit card transactions clear instantly.

Step 5: 
Sell when needed

The same “buy/sell” tab is where you’ll be able to exchange your cryptocurrency for fiat.


To do so, first make sure to have crypto in your Coinbase account, and then select the USD/BCH option. Once there, select how many BCH you want to sell (max amount, naturally, is all you have in your account).


You’ll be asked withdrawal method, and given options depending on your country of residence.


Common fiat withdrawal options on Coinbase are credit card and bank accounts, with some countries also having the PayPal option.

Step 6: 
OPTIONAL: Move your crypto to a wallet of your own

While Coinbase offers an integrated crypto wallet where your cryptocurrency is kept and that you can use to send payments, some people would rather keep their crypto on wallets that they own, particularly in cold storage.


For this you’ll need a crypto wallet that supports BCH.


The steps are simple – you just need to give Coinbase the wallet address after going through 2FA – and the fees aren’t huge. You will, however, need to have verification level 3 in order to be allowed to withdraw crypto.


The reason some people recommend that you keep your crypto outside is that, if you use Coinbase’s wallet, they’ll know where you’re sending money to or receiving from.


Coinbase has been reported for closing user accounts when they disagree with the transactions they make on moral or ethical grounds, so if you’ll actually be using your cryptocurrencies for varied reasons, it’s better to have them on your own, private wallet.

Should You Invest in Bitcoin Cash?

In the end, it all comes down to this. Is an investment in Bitcoin Cash advisable?

The answer is more complex than it seems, and whether investing in it is wise or not depends on your goal.

Bitcoin Cash isn’t likely to turn you into an overnight millionaire, nor is it likely to deliver immense returns even in the long term.

For one, if you are going to buy and hold, it is most likely you will be better off than having your funds in a savings account or even government bonds in terms of returns on investment.

As a more stable cryptocurrency, the gamble you take with BCH when compared to BTC is smaller, but so are the expected returns.

What Bitcoin Cash can do for you is give you a steadily increasing value that will, in the long term, amount to a decent earning on your investment. Expecting more from the token might be expecting too much.

As with every crypto token, however, you need to keep an eye on the market at all times. Bitcoin Cash has a relatively stable market, but no token is ever totally stable.

There’s always a chance that its price might spike or plummet overnight, so being on top of the crypto scene and what’s happening in it is still a must.

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