In the cryptocurrency market, Bitcoin (BTC) has exhibited minimal fluctuations within the last day, maintaining a stable position around the $70,000 mark following a period of heightened volatility. The cryptocurrency briefly surged past $71,000 on Tuesday before settling back to its current levels, with anticipation building towards a significant options expiry set for Friday.

The performance of other leading cryptocurrencies was marginally lower, according to data from CoinGecko. Notably, the valuations of Solana’s SOL, XRP, and BNB from the BNB Chain dipped by up to 2%, and the Internet Computer’s ICP experienced a decrease of 6%. Market analysts have hinted at a potential broader market retreat if Bitcoin dips below the $69,000 threshold in the near future.

BCH price volatility

A senior market analyst at a renowned trading firm communicated that the recent downturn of Bitcoin below the $70K mark reflects a cooling period for the market bulls and a dampened risk sentiment across global markets. He further noted that the market participants are now closely watching to see if Bitcoin will challenge the recent low of $69.5K reached on Tuesday. A descent below this figure might indicate a longer period of market correction.

Dogecoin (DOGE) stood out among the major cryptocurrencies, registering a 6% increase, which equals to a price of $0.21 per DOGE. This uptick is reminiscent of patterns observed before significant upward movements in its value, propelling the coin above 21 cents for the first time since December 2021.

The general cryptocurrency index, which is a comprehensive index representing the top cryptocurrencies excluding stablecoins, showed a decline of 1.4%.

In contrast, Bitcoin Cash (BCH) experienced a notable surge of 15%, reaching $572 on Gate.io, in anticipation of its upcoming halving event scheduled for April 4. The futures market tracking BCH witnessed a significant uptick in open interest, soaring to $500 million on Thursday from $213 million the previous week, indicating a growing expectation for price volatility linked to the halving.

The halving process, characterized by the halving of mining rewards, effectively reduces the pace at which new coins are generated, thereby constraining the influx of new supply into the market. With Bitcoin’s next halving anticipated on April 20, historical trends suggest a potential bullish phase for the cryptocurrency following such events.

What is Bitcoin Cash halving?

Halving is a critical mechanism embedded within the code of certain cryptocurrencies, such as Bitcoin and Bitcoin Cash, designed to control inflation and extend the currency’s life span by gradually lowering the rate of new coin output. This event occurs at pre-set intervals, typically every four years or after a specific number of blocks have been mined. During a halving, the reward that miners receive for verifying transactions and adding them to the blockchain is cut in half. For instance, if the current reward for mining a block is 6.25 coins, following a halving, this reward would decrease to 3.125 coins.

The purpose of halving is twofold. First, it mimics the effect of mining precious metals like gold, where over time, mining becomes more difficult and less profitable, ensuring that the commodity remains scarce and valuable. Similarly, halving ensures that cryptocurrencies remain scarce, enhancing their potential value over time. Second, halving helps control inflation by slowing the rate at which new coins enter circulation. This is in stark contrast to traditional fiat currencies, where governments can print money at will, potentially leading to inflation.

Moreover, halving events often lead to speculative anticipation in the crypto markets, as investors predict the reduced supply of new coins to increase demand, and thus the price. However, the actual impact of halving on a cryptocurrency’s price can be influenced by a myriad of factors, including market sentiment, investor behavior, and global economic conditions. Despite this, halvings are considered milestone events within the cryptocurrency community, marking phases of growth and maturation for digital currencies as they evolve and adapt over time.

BCH explained

Bitcoin Cash (BCH) originated from a pivotal moment in the history of Bitcoin, known as a “hard fork,” which occurred on August 1, 2017. This event was the culmination of a long-standing debate within the Bitcoin community over how to scale the network to accommodate a growing volume of transactions. As Bitcoin’s popularity surged, it became evident that the original blockchain’s 1 MB block size limit was insufficient to handle the increasing transaction load, leading to slower transaction times and higher fees.

The community was divided on how to solve these scalability issues. One faction proposed implementing a software upgrade called Segregated Witness (SegWit), which would increase the block capacity without altering the block size limit, alongside later developments like the Lightning Network for off-chain transactions.

Another group advocated for increasing the block size limit to enable more transactions to be processed within each block, thus directly addressing the scalability problem. This latter group’s proposal led to the creation of Bitcoin Cash through a hard fork, which essentially split the Bitcoin blockchain into two distinct paths: the original Bitcoin (BTC) and the new Bitcoin Cash (BCH). Bitcoin Cash distinguished itself with an initial block size limit of 8 MB, which has since been increased, aiming to facilitate faster transactions and lower fees compared to Bitcoin, adhering to a vision of a peer-to-peer electronic cash system as outlined in the original Bitcoin whitepaper.

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• Source: Plato Data Intelligence.