Buying Bitcoin: August Updates, Bitcoin Cash And Litecoin

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Well, the foreshadowed August 1st date has officially past and we’re seeing how Bitcoin has responded to moving pasts its latest obstacle: it’s up almost 50% from its value exchange one month ago.

Bitcoin has hit its all-time high nearly every day this week and shows no signs of stopping. Bullish calls are that it could hit $5,000 and those calls are not for too far into the future. As with all things, there are naysayers like Bank of America’s (BAC) Francisco Blanch, head of its Global Commodities and Derivatives Research, that say widespread acceptance is needed before the price means anything.

Well, some of that might be headed our way. Overstock.com (NASDAQ: OSTK) announced recently that it would be accepting Bitcoin (and other coins) through a partnership with Shapeshift, an online exchange. But that’s not all. Overstock also announced it will be holding 50% of its incoming Bitcoin, a clear sign of bullish feelings from the online retailer.

So all is well and good in Bitcoin world, yes?

Well, almost. There are a few other coins competing for space with Bitcoin—and that battle will need to be cleared up to really understand the long-term value Bitcoin might hold. The two coins are Bitcoin Cash and Litecoin. We’ll look at both here.

Bitcoin Cash is one of the newer coins to market—the direct result of the August 1st hard-fork on Bitcoin. Its existence can be as mysterious as its value is volatile right now.

Bitcoin Cash was created to take the place of limitations some saw on the Bitcoin platform; mainly the speed at which the platform can process transactions. In a simple way of thinking about it, Bitcoin can process about 4 transactions per second. Visa (V) for comparison does about 2,000. Miners and Bitcoin enthusiasts saw the need to scale this as such a pressing issue that they were willing to split Bitcoin (which is what August 1st was all about). So anyone Bitcoin in existence on August 1st was copied and its owner was given Bitcoin Cash (BCH) for it.

Since Bitcoin Cash has become its own entity, it has accrued $5.5billion in market cap and is currently the 4th most valued coin by that same metric. Its price has been as low as $234 and as high as $727 in just its first week. Most investors are staying away, but remember that this was given to anyone investor who also owned Bitcoin. So, the expectation is that there’ll be a dump of these once exchanges allow for it. That starts August 8th and will have significant impact on Bitcoin and other coins—Ether, for instance.

I foresee an enormous purchase of Bitcoin from those selling their hard-forked coins, which could push Bitcoin’s value well up near the $4,000 mark by mid-August, with some regression to be expected from such an enormous one-off pump.

On the other side of this is Litecoin, a long-time Bitcoin competitor. Its main purpose is very similar as Bitcoin Cash, a lightweight version of Bitcoin that can process faster. It, however, has been around for more than four years and has had major standing and stability (I say this with the extreme relativity of crypto as a whole). Its market cap and value chart has followed almost lockstep with Bitcoin.

Unlike Bitcoin though which does not have one leader, Litecoin has Charlie Lee, its founder and director of its vision. Charlie left the Litecoin project to work for the popular exchange Coinbase, only to return this year. Litecoin fans responded enthusiastically to this.

Litecoin and Bitcoin Cash are similar enough however that Litecoin has seen some flatness while Bitcoin Cash attracts new money looking for a boom. This marks one of the first times Bitcoin has seen a major boom (50% in the last 30 days) without Litecoin joining on the same growth trajectory.

Litecoin will need to see what happens with any Bitcoin Cash movement before one knows it’s real value; and then it’s still a race to see adoption with Bitcoin at large. If retailers aren’t seeing the value of Litecoin, it’s hard to make the case for consumers who see Bitcoin’s fame grow farther and wider. I see Litecoin outlasted Bitcoin Cash, as it does have some smaller technological advantages, but I don’t know if those will carry it to full adoption.

Both Bitcoin and Litecoin have a bright immediate value proposition with Bitcoin Cash sell-offs coming. I think Bitcoin can ride out its early adopter news to even greater heights and I don’t think $5,000 is unobtainable this year. It does have some issues to solve for and other coins are starting to really produce technology that can serve their niches, so there’s some cause for caution.

Still, 2017 will be the year of cryptocurrencies first rise and Bitcoin is still the leader of the pack, despite some competition among other top5 market cap currencies.

Disclosure: I am/we are long BITCOIN, LITECOIN AND BITCOIN CASH.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.


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