Bitcoin Cash came into existence in August 2017, when a disagreement amongst Bitcoin developers led to a "hard fork." Bitcoin Cash's creators broke away from the original Bitcoin blockchain to develop a new protocol that could handle higher volumes of transactions per second.
Bitcoin Cash (BCH) initially traded at around $240 and grew 16x in four months, climbing above $3,900 by December 20, 2017. The price has since tumbled from those heights, but could be heading back there. This guide will show you how to invest in Bitcoin Cash to ensure you don't miss out on the opportunities it offers.
The section below will cover four ways you can invest in Bitcoin Cash. There are different types of investors with varying objectives when it comes to investing in cryptocurrencies, and the following summary will help you to find a strategy to suit your needs.
Before you join a crypto exchange to buy Bitcoin Cash (BCH), you’ll need to get a crypto wallet where you can safely store your coins. A wallet is a piece of software or hardware that allows users to securely and easily store and access their digital currency.
Software wallets often come in the form of websites and mobile apps, such as Trust Wallet, Coinbase Wallet, and Bread Wallet. These are convenient for investors who want to access their tokens often –– to trade or conduct frequent transactions.
Hardware wallets are devices that look like USB flash drives, and are recommended for investors who hold substantial amounts of Bitcoin Cash. They store your coins offline and only connect to the internet when you need to make a transfer in or out of the wallet, which adds an extra layer of security. Popular options include Ledger’s Nano X and Nano S, as well as the Model T by Trezor.
After acquiring a wallet, you’re ready to buy some Bitcoin Cash. Join a reputable crypto exchange and register an account by completing the KYC (Know Your Customer) process. Regulated exchanges require identity verification checks in order to prevent money laundering and fraud, and although these may seem excessive, they are indicative of a trustworthy exchange. You may need to upload your ID/passport, proof of address, and a selfie to finish the verification process.
A common misconception amongst new cryptocurrency investors is that they have to buy a whole coin, which is often impractical due to the high cost of these assets. In fact, many coins including Bitcoin Cash can be purchased fractionally: you can own a small fraction of one BCH for just $1, although some cryptocurrency exchanges do have minimum purchase limits.
Buying fractions of BCH allows you to gain exposure quickly, and build your portfolio over time. There’s no need to save up for a whole coin: simply sign up with an exchange, verify your account, make a deposit, and make your first fractional purchase.
Many investors want to trade cryptocurrencies over shorter timeframes rather than holding them as a long-term investment. If you fall into this category, you can use a reputable broker to trade Bitcoin Cash, or alternatively, financial instruments linked to the asset.
A good broker will offer a range of services, including “spot” trading. This allows traders to purchase Bitcoin Cash at the current (“spot”) price, and then sell it for profit when the price rises. This can be done without setting up a wallet, as the broker retains custody of the coins, and allows you to quickly and easily trade Bitcoin Cash without many of the complications of owning it directly.
Futures contracts, contracts for difference (CFDs), and options contracts are all types of ‘derivatives’ offered by brokers, which allow you to speculate on the price action of BCH without actually buying coins. Many online brokers also allow you to use leverage, which involves borrowing extra capital from the broker for a trade. This can potentially increase your profits (as well as your losses) when trading these instruments.
Investing in an ETF, or exchange-traded fund, allows you to gain exposure to Bitcoin Cash through the traditional stock market.
ETFs are regulated products, which means that they are subject to high levels of scrutiny, so investors can be confident that their money is safe. Many crypto ETFs are composed of many different coins, allowing you to spread your investment across a managed portfolio. Some are composed of one coin only, providing more direct exposure to a single asset such as Bitcoin Cash.
Before you begin your BCH investment journey, there are a few things you need to pay attention to. These can make or break your investment experience.
There are many fees associated with investing in Bitcoin Cash. For starters, there are network fees associated with buying and selling the token. However, these fees are much cheaper compared to Bitcoin. An average BCH transaction costs only a few cents, and even when the network is in high demand, it doesn't cross $2.
There are also fees associated with exchanges. They will vary from one platform to another. Fees accumulate, especially for short-term traders, so it is wise to analyse various fees charged on a platform and select one with low costs. The payment processor you choose to fund your account may also incur a charge. Brokers hold the coins for you, circumventing network charges, but they will charge commissions and inactivity fees.
There are a few risks associated with investing in Bitcoin Cash and cryptocurrencies in general. Being aware of the situation helps one to take the necessary steps to protect themselves from these risks. For starters, the crypto market is highly volatile, and prices can change overnight. A $10,000 investment can be reduced to $6,000 overnight.
If you are a long-term investor and a BCH believer, this shouldn't worry you, as the asset will bounce back. But if you are a short-term investor, this can be alarming. In this case, you can consider hedging using the strategies described above, or you can diversify your investment with other coins to mitigate the downside.
Another risk associated with crypto investment is the lack of adequate regulations. This has passively allowed the existence of scams that steal from unsuspecting investors. It would be best if you did your due diligence to avoid falling for some of these scams. ETFs are regulated, so provide a great option for those wary of scammers.
Additionally, your account and wallets can get hacked, and you can lose your tokens. Therefore, it's good to take all the necessary security measures such as setting a strong password, activating 2-factor authentication (2FA), and investing in a hardware wallet to minimise your tokens' chances of getting accessed by bad actors.
Different platforms will support various payment methods. When selecting a platform where you can invest in BCH, you will have to go for one that supports the payment method you feel most comfortable with. A good investment platform should support many modes such as bank transfers, credit/debit cards, e-wallets, third-party payment processors, other cryptocurrencies, and so on.
If you are looking for alternative methods to invest in BCH, you can:
A Bitcoin Cash ETF provides traders and investors with a legal and simple method to invest in BCH. It's an investment driver that keeps track of the price movement of Bitcoin Cash and is traded on the conventional stock market. ETF's value increases and decreases the subject to the price of BCH. It's a perfect way to invest for individuals who don't want any technical involvement like managing Bitcoin Cash addresses, wallets and private keys.
Any individual can mine Bitcoin Cash tokens. For mining BCH, you need specialised hardware called mining equipment which you can either rent or purchase. Miners are also required to run a full node software such as BCHN that can create blocks and enables you to connect to the rest of the cryptocurrency network. You can perform mining alone but, for better results, miners pool their hash rate and share the resultant rewards proportionally.
The cryptocurrency market has grown ten-fold in recent years. Experts feel that digital assets are finally going mainstream, and there is plenty of evidence to support this view. Large institutional investors are no longer afraid of investing in digital assets, and are actively investing and accumulating various tokens. Mass adoption is expected to follow suit, and once this happens, many expect BCH to grow its market cap of $9 billion by ten times or even more. Based on the past trend, the current price of BCH could seem like a bargain a few years from now.
This guide has outlined the simplest ways to get into BCH investment and make the most of the asset. It's up to you to decide which strategy you would like to employ as each strategy offers different results. The end goal is profitability, and if you stick to the advice provided here, you should realise significant returns.