Bitcoin Cash

Bitcoin Cash (BCH) is a cryptocurrency created in 2017 from a “fork” or split of the original Bitcoin (BTC). Imagine a popular software program where the developers disagree on a critical update. One group releases a new version, while another faction creates a modified version under a new name. That's essentially what happened here. The core disagreement was about how to help Bitcoin handle more transactions faster and cheaper. The creators of Bitcoin Cash believed the simplest solution was to increase the network's block size limit, allowing more transaction data to be processed at once. This change was designed to keep transaction fees low and confirmation times quick, positioning Bitcoin Cash as a more practical system for everyday payments—a true form of “digital cash” as its name implies, in contrast to Bitcoin's growing reputation as a “digital gold” or store of value.

In the mid-2010s, Bitcoin's popularity was its own worst enemy. As more people used it, the network became congested. Transactions could take hours to confirm, and fees skyrocketed, making it impractical to buy a cup of coffee with Bitcoin. The community fiercely debated how to solve this “scaling” problem. Two main philosophies emerged:

• The Bitcoin Core (BTC) Approach: This camp, representing the majority of developers, favored a sophisticated software upgrade called Segregated Witness (SegWit). SegWit was a clever, less direct way to increase transaction capacity without altering the fundamental block size. Proponents argued this was a safer, more decentralized path forward, as keeping blocks small meant that more people could afford to run a full node, thus protecting the network's integrity.
• The “Big Block” Approach: A vocal minority argued for a much simpler solution: just increase the block size from 1 megabyte (MB) to 8 MB or more. They believed this was closer to the original vision of Bitcoin's anonymous creator, Satoshi Nakamoto, for a peer-to-peer electronic cash system. They felt the SegWit approach was overly complex and strayed from this core purpose.

Since the two sides couldn't reach a consensus, the “big block” proponents decided to go their own way.

On August 1, 2017, the pro-increase faction initiated a hard fork. A hard fork is a permanent divergence in the blockchain, creating two separate networks with a shared history but different rules going forward. For investors, this event was fascinating. Anyone who held Bitcoin at the moment of the fork automatically received an equal amount of Bitcoin Cash. If you had 5 BTC in your private wallet, you woke up the next day with 5 BTC and 5 BCH. It was like receiving a surprise stock dividend from a company you owned shares in. This “airdrop” instantly created a new, multi-billion dollar cryptocurrency and set the stage for a long-running rivalry with Bitcoin.

For a value investor schooled in the teachings of Benjamin Graham or Warren Buffett, analyzing a cryptocurrency like Bitcoin Cash presents a major challenge. The traditional tools of value investing simply don't apply.

A value investor determines the intrinsic value of an asset by looking at its ability to generate future cash. A company has earnings, a property generates rent, and a bond pays interest. Bitcoin Cash has none of these. It doesn't produce anything, has no earnings reports, and no book value. Its price is determined almost entirely by supply and demand, which in turn is driven by:

• User Adoption: Its potential to be widely used for payments.
• Network Effect: The idea that its value increases as more people use it.
• Speculation: The belief by market participants that its price will rise in the future.

This makes it impossible to calculate a “fair price” in the way you could for a company like Coca-Cola or Apple.

A durable competitive advantage, or “moat,” is crucial for a long-term investment. Bitcoin Cash's moat is arguably very weak.

• Competition: It competes directly with Bitcoin, which has vastly superior brand recognition, network security, and institutional acceptance. It also competes with newer, faster cryptocurrencies designed for payments, such as Litecoin, Ripple (XRP), and Solana.
• Security: As a smaller network with fewer miners than Bitcoin, BCH is theoretically more vulnerable to a 51% attack, where a malicious group could gain control of the network and potentially double-spend coins.
• Governance and Identity: The Bitcoin Cash community has itself been prone to infighting and further forks, most notably the creation of Bitcoin SV (Satoshi's Vision) in 2018. This internal strife and the confusing branding (“Which one is the real Bitcoin?”) have hindered its quest for mainstream adoption.

From a strict value investing perspective, Bitcoin Cash is not an investment but a speculation. An investment is an operation which, upon thorough analysis, promises safety of principal and an adequate return. A speculation is an operation that doesn't meet those requirements. The “investment case” for Bitcoin Cash rests on the narrative that it will one day become a dominant global payment system. This is a bet on a future outcome, not an analysis of current value. While it offers a clear technical alternative to Bitcoin, it operates in an incredibly crowded and competitive market. For the average investor, any allocation to Bitcoin Cash should be considered highly speculative—money you can afford to lose entirely—and should represent only a tiny fraction of a well-diversified portfolio.