Bitcoin Cash hard fork, a disservice or a lightning bolt for cryptocurrencies?

The cryptocurrency markets remain depressed, as the Bitcoin Cash’s November hard fork raised important questions about the reliability of cryptocurrencies as ‘medium of exchange’.

The hard forks remind investors that reaching a solid and viable consensus through a unique currency is difficult to achieve in a quasi-perfect democratic operating system.

So, the question is, could a currency survive without the endorsement of a central authority? For example, what if the US dollar was issued by independent communities instead of the Federal Reserve? What would happen if one of the communities had the power to change its colour to pink rather than green? Would a pink USD banknote have the same value as a green one?

This is indeed a comprehensible concern, and at some point, it should change the way many dreamed about the utility of cryptocurrencies – as a global exchange vehicle.

Today, there are plenty of valid reasons which may encourage users to opt for Bitcoin, Bitcoin Cash ABC, Bitcoin Cash SV or others. In this context, it is unlikely for one of them to triumph continuously, in the expense of the others.

In addition, as blockchains are regularly updated technologies, none of the actual cryptocurrencies are the final versions of themselves; they are subject to changes. As changes are decided by independent communities, the forks are unavoidable.

This is a concept that traders should deal with. Therefore, the first and the most important step is perhaps to abandon the idea that one cryptocurrency will overrule.

There may not be a single, global cryptocurrency

The reason why Bitcoin’s market cap stands for roughly 55% of the cryptocurrency market is due to a misleading belief that only one, or a couple of cryptocurrencies, should survive and thrive at the expense of the others. In this sense, it is perfectly normal that this dream vanishes when a hard fork tears apart a major cryptocurrency such as Bitcoin Cash. It only confirms that the new versions of Bitcoin Cash are also, and inevitably, subject to future forks.

So, how could a cryptocurrency defend its value if it keeps on forking? It may, or it may not.

Today, it is safe to say that only a central authority could grant the existence of a single currency. The centralized structured needed to ensure a unique currency is perfectly perpendicular to a decentralized operating system, which naturally fails to remain under one roof. Hence, the blockchain technology may not offer a suitable base for a single, digital currency.

The vanishing dream of a unique and global cryptocurrency is currently weighing on Bitcoin. The BTC/USDT slipped below the $4000 mark from nearly $20’000 a year ago, and the pair has little to convince investors to change their bearish position for the moment. As a result, a Santa rally is unlikely to knock on Bitcoin’s door this year. Bitcoin may need to rethink and refine its product to bring investors back on board. Otherwise, the selling pressures based on speculation will likely remain intact prior to the $5000 threshold.

In term, Bitcoin’s market cap, and not its market value, is a major indicator of the health of the cryptocurrency market, because the blockchain technology and its cryptocurrencies are an increasingly explored field. They offer a unique and adequate financial vehicle, perfectly compatible with our increasingly digitalized economies. Cryptocurrencies are sure suitable for fund transaction, yet the outcome of the powerful blockchain technology may not be a single, global currency.

A cryptocurrency is the currency of its own ecosystem

The word ‘currency’ has long been misleading the crypto-investors. A cryptocurrency is a unique concept: it won’t fit into the definition of an already-existing asset.

As mentioned in our earlier articles, a cryptocurrency should be positioned somewhere between a stock and a currency. In fact, cryptocurrencies should be perceived as the currencies of their own ecosystems. They allow users to be shareholders and the companies to get a direct financing for their projects.

This is an efficient, powerful and innovative concept. It could change the way we do finance and make transactions, though it may not make the dream of a global digital currency come true.

Hence, there is room for cryptocurrencies to co-exist and thrive separately, provided that they offer solid fundamentals such a viable business model, a product or a service that justify the creation of a cryptocurrency.

In this context, the Bitcoin Cash hard fork has certainly disheartened those who believe that a single currency could globally emerge and takeover the traditional currencies, but had little impact for those who value the blockchain technology and cryptocurrencies for the endless opportunities that they stand for.