Bitcoin Cash (BCH) Fundamental Analysis

Since the emerging crypto asset class is much like venture capital with liquidity, performing a quick market size analysis can provide insights into potential fundamental asset value.

What is Bitcoin Cash (BCH)?

Bitcoin Cash is a cryptocurrency which was “forked” from Bitcoin, after the Bitcoin community refused to increase block size on its blockchain. Bitcoin Cash has among other attributes, a much larger block size than Bitcoin. This difference in block size allows for lower network fees and therefore, according to Bitcoin Cash developers, fulfills the original goal of decentralized cryptocurrency. As a peer-to-peer cryptocurrency, Bitcoin Cash can and is used to transact goods and services without the need for intermediaries.

Questions to Consider when Investing

  1. Is there a published whitepaper? 

Yes (the original Bitcoin whitepaper) …positive

  1. Is there a detailed development road map? 

Yes, the technology is in use…positive

  1. Does it use an open, public blockchain, and is the code published? 

Yes…positive

     4.  How strong is the technology’s differentiator (Strong, Mediocre, Weak)? 

Mediocre…forked off the Bitcoin blockchain and retains the value of Bitcoin brand recognition. Bitcoin Cash is currently ranked the 4thlargest crypto asset behind Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP). Despite the 4thplace ranking, Bitcoin is the only pure “cryptocurrency” play amongst the other crypto assets mentioned. The reason being that Bitcoin is targeting a store of value use case, Ethereum a utility use case, and XRP a cross border payments use case.

      5.  How competitive is the industry the asset is entering (Strong, Mediocre, Weak)? 

Strong…negative

Price Target

Assuming:

  1. Bitcoin Cash survives potential regulatory and technological hurdles.
  2. Bitcoin Cash is adopted as an alternative currency in “Low Income” countries.
  3. Bitcoin Cash captures 50% of Gross Domestic Product (GDP) in “Low Income” countries by 2021.
  4. A 30% discount rate is used to bring future price targets (3 years in this report) to today’s dollar values. Although 30% is significantly higher than the current risk free rate, crypto assets must be discounted significantly to account for risk.

Bitcoin Cash enjoys the positive brand recognition in emerging market economies that Bitcoin does, but has lower transaction fees. This attribute makes Bitcoin Cash a more feasible cryptocurrency in emerging market economies than Bitcoin. Using World Bank figures for “Low Income” Country Gross Domestic Product (GDP), and assigning a certain share to Bitcoin Cash provides the basis to build a price target model. “Low Income” Country GDP is less than half of one percent of total world GDP.

Given the assumptions (above) the 3-year Bitcoin Cash price target is given below:

bitcoin cash bch fundamental analysis