Trading Bitcoin Cash - BTC Difficulty Adjustment Day
Fundamentally, we know we are approximately 92 blocks away from Bitcoin Legacy difficulty adjustment. It will adjust downwards 2% from its current difficulty level, which as you can see is already at a high.
What this means is that a 2% difficulty reduction is extremely insignificant. If hashpower moves away from Legacy to Cash anywhere in-and-around this time, unconfirmed transactions and all the delays in getting confirmations and the high fees you pay for the privilege of waiting will become a much, much more serious problem than they were a few weeks ago.
Because Bitcoin Legacy must discover 2016 blocks before it can adjust difficulty again, that means no matter how long it takes to find those blocks, the Bitcoin Legacy chain has no choice but to let the mempool pile up with unconfirmed transactions. What this means is that when unconfirmed transactions pile up high enough, the Legacy chain will be unable to process further transactions and Bitcoin Legacy (BTC), will be in serious trouble.
Right now, Bitcoin Cash actually has considerable miner support, with 5 of the top pools from Bitcoin Legacy actively mining the Cash chain:
Since the November 13 change to the Difficulty Adjustment Algorithm, Bitcoin Cash's difficulty adjusts each block based on the difficulty of a sliding window of the last 144 blocks. This is so effective at managing hashpower fluctuation, that after the new DAA was released it only took approximately 30 hours to return to 6 blocks an hour from the 18-20 that were being produced as a result of so much hashpower being added to the blockchain.
We also know that there’s trouble in paradise with Blockstream themselves, as they’ve had multiple scandals emerge in the last few days. This may be the beginning of Operation Dragonslayer, which you can read my theories on here:
Regardless of hype, price action confirms bullish momentum and we are amidst a turbulent situation as bearish sentiment abounds everywhere outside of the Bitcoin Cash market.
On the four hour chart, it is a unique situation caused by the parabolic blow off top that was the one-night run from ~$700 to $2800. Normally amidst price action like this, the market slowly/quickly falls downwards as there’s no buying support at the much-inflated price.
However, in Bitcoin Cash’s case, there has been tremendous support, as it showed that even during Tether FUD night, it was one of the least dumpy coins across the entire market.
We are currently amidst a breakout. On the longer term chart, price action is rising through a large red Kumo, and it’s looking like we’re on the edge of a breakout. RSI, EMA, and Stoch show a similar pattern to a recent up-move. Tenkan-Sen and Kijun-Sen also show a bullish cross, which is very major on the longer candles considering the price action and growth.
Right now key points are at the 0.618 Fib at ~$2100. If Bitcoin Cash can break through this and maintain it, I believe it will uptrace towards its all-time high at $2800. That being said, that’s still a ways away, so I would recommend having more down-to-Earth targets.
Ultimately, our target if all conditions can be cleared is ~$3500. If it sounds lofty, well, fair enough. However, it is determined by being the 4.236 uptrace of the previous cycle. Bitcoin does tend to hit those targets, so keep that in mind.
For specifics on how to trade Bitcoin Cash today, you can find those behind the paywall. I believe you will get your money’s worth if you are trading this coin today.
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