Bitcoin Rival Soars, Then Stumbles, in Tumultuous Second Day

Bitcoin Cash spent its second day in existence bouncing back in another volatile day.

In frenetic trading, Bitcoin Cash jumped above $700, before falling back to $458.94 in afternoon trading, according to digital currency tracker Coinmarketcap.com. The latest price was about 87% higher than it was a day ago, yet about 35% lower than its Wednesday peak.

Bitcoin Cash’s market capitalization of about $7.4 billion was the third highest among cryptocurrencies, behind only Ethereum and bitcoin itself. However, despite what appears to be a fair amount of enthusiasm for the breakaway currency, there is a question about exactly how much activity the network is seeing.

The volume of Bitcoin Cash traded over the last 24 hours was about $366 million, according to coinmarketcap. That’s less than bitcoin’s $1.2 billion trading volume, but a respectable amount for a currency that’s only two days old. However, on Wednesday, only two “blocks” of transactions had been mined in about half a day. A mined block represents a batch of settled transactions, much like a stock settling after the trade has been executed.

By comparison, bitcoin produces a block roughly every ten minutes, and Ethereum produces a block roughly every few seconds.

By that measure, Bitcoin Cash is hardly active at all. The future of Bitcoin Cash will be dependent upon how many users it pulls from bitcoin proper. Just like the original, Bitcoin Cash is dependent upon “miners,” the groups that run the software and confirm transactions in exchange for newly created bitcoins. It is impossible to say how many miners Bitcoin Cash will attract, but it wasn’t expected to be a large amount, at least not initially.

The original bitcoin has grown over the last eight years, despite a fierce debate over how much network capacity should be dedicated to making trading faster. The new Bitcoin Cash project was announced July 22. Some exchanges have distanced themselves from the new currency, saying they wouldn’t accept it until it could prove itself stable and secure.

Bitcoin Cash is a response to a controversial industry compromise settled on a week earlier. That compromise was aimed at resolving a two-year-old impasse over a technical issue: how to best expand network capacity.

The pact remained controversial enough that a splinter group took the extreme step of “forking” bitcoin’s software, essentially creating an updated version of the program and running it live.

Launching a new version of bitcoin is technically complicated, and many exchanges were choosing to sit this one out, at least until it is clear whether or not the new currency is stable.