Since the block rewards for Bitcoin Cash (BCH) miners were cut in half more than a month ago, the network has awakened to a harsh new reality.
A good number of miners on the network pulled the plug on their mining rigs due to the reduced revenue. Consequently, the hash rate has dropped precipitously, economic throughput is now considerably low, and the cost per hour of conducting a 51% attack on the network is remarkably low.
Bitcoin Cash Is Not Looking Healthy: Analyst
Yassine Elmandjra, a crypto analyst at ARK Invest recently evaluated some of BCH’s network fundamentals, noting that they have been deteriorating since the halving on April 8. Elmandjra opined that the Bitcoin Cash network does “not look healthy” especially due to fundamentals that have taken a turn for the worst. Let’s take a look at his findings.
First, he posited that BCH’s hash rate is down 30% since the halving. Prior to the halving in April, miners on the network started migrating to the BTC network which was still in the 12.5 BTC reward era. Although the BTC network also underwent rewards halving a month later, it appears the miners are yet to return to the BCH blockchain.
Secondly, Elmandjra argued that the economic throughput on BCH is at all-time lows. The network’s transaction count has dropped from 90,000 to 56,000 while the average transferred value has declined by circa 60%, according to data from Coin Metrics. This startling reduction in economic throughput has resulted in less revenue for miners as they are only receiving 0.05% from transaction fees. For comparison, bitcoin miners get over 10% of their revenue from transaction fees. Advertisement
Another worrying metric on the BCH network is reduced security. As the processing power used to secure the network falls, BCH becomes less secure, suggesting that bad actors can easily launch a 51% attack. Elmandjra pointed out that the cost of such a malicious attack on BCH is now less than $10,000 per hour. He even stated that he is “surprised we haven’t seen a large-scale attack yet”.
Bitcoin Cash is not looking healthy:
-Hashrate down 30% since halving (& only accounts for ~2% of SHA256 hash)
-Economic throughput at all time lows
-Fees are .05% of miner rev (<$100/day)
-Theoretical 51% attack costs <$10k/hr
Surprised we haven’t seen a large scale attack yet— Yassine Elmandjra (@yassineARK) May 23, 2020
Bottom Line: Weak Fundamentals Could Hamper The BCH Price
Meanwhile, BCH’s price is not doing too hot either. A day before its halving, BCH was trading at around $268. Since then, however, the price has been on a downward spiral. At the moment, BCH is valued at $228, representing a 15% slide from the pre-halving price.
A decrease in the network hashrate indicates that fewer miners are willing to commit their resources in mining the crypto-asset. This suggests that the miners don’t anticipate the Bitcoin Cash price to increase over the medium to long-term.
We are yet to see whether the weak metrics will continue worsening or if the BCH network will be able to find some sort of stability in the coming weeks. It goes without saying that the accompanying uncertainty poses serious risks for BCH investors.