Bitcoin in recent days don't seem to follow much TA rationale. I wonder if the current bull trend we are seeing is due to the profitability wars between BTC and Bitcoin cash. I will put forth my understanding of the dynamics at play in this war.
To ensure that we have a constant creation of bitcoin in the face of increasing hashing power, the bitcoin network has Difficulty, which enforces a law of diminishing return vs hashing power. The Difficulty is recalculated every 2016 blocks, which takes about 15-20 days at a rate of 5-6 blocks an hour. if rate of block creation in the period is greater than 5-6 blocks an hour the difficulty rises, miner profitability decreases and vice-versa.
When BCC was created, it had less that 5% of the BTCs hashing power. At the rate of difficulty at the time of the fork, it would have take 200 days to make one difficulty adjustment(2016 blocks). by which time people would have lost interest due to slow transaction times and the 5% miners would have moved away due to very serious loses. To prevent this nuclear winter,In addition to the above logic, BCC introduced a emergency difficulty adjustment (EDA) which will reduce difficulty(not increase) if it take more than 12 hours to generate 6 blocks. which reduced the difficulty adjustment from 2016 blocks to just 6 blocks.
So in the current scenario, both BTC and BCC have the same profitability ,which can be tracked herefork.lol. Hence they both have roughly the same amount of hash power fork.lol/pow/hashrate. Since BCC has had multiple EDAs, it is able to generate 25 blocks/hour vs BTC 4 blocks/hour with the same hash power.
Now what happens if the prices of BTC or BCC falls.
1) if the price of BTC falls (10-20%), BCC becomes much more profitable and most of the hash power will move to BCC. Since BTC does not have EDA, it will go into a nuclear winter of its own and may possibly die due to low transactions and low miner profitability. so it is essential that BTCs price does not fall for its own survival. There is a lot of motive to prop up prices for the companies supporting BTC
2)The above is not the case for BCC if its price drops, it has EDA. if it price falls by 50%, it just needs 12 hours more to correct the difficulty to make it profitable. There is a motive to prop up the price here as well, just not as much as BTC.
The side effect of the EDA is that BCC will have breakneck speed for 2-3days followed by 12-24 hours of very very poor speeds. which is not optimal.
In the end, i feel both prices are proped up. I am also not happy with what this war means for cryto.
Would be happy to be corrected if any of my data points are off.
To ensure that we have a constant creation of bitcoin in the face of increasing hashing power, the bitcoin network has Difficulty, which enforces a law of diminishing return vs hashing power. The Difficulty is recalculated every 2016 blocks, which takes about 15-20 days at a rate of 5-6 blocks an hour. if rate of block creation in the period is greater than 5-6 blocks an hour the difficulty rises, miner profitability decreases and vice-versa.
When BCC was created, it had less that 5% of the BTCs hashing power. At the rate of difficulty at the time of the fork, it would have take 200 days to make one difficulty adjustment(2016 blocks). by which time people would have lost interest due to slow transaction times and the 5% miners would have moved away due to very serious loses. To prevent this nuclear winter,In addition to the above logic, BCC introduced a emergency difficulty adjustment (EDA) which will reduce difficulty(not increase) if it take more than 12 hours to generate 6 blocks. which reduced the difficulty adjustment from 2016 blocks to just 6 blocks.
So in the current scenario, both BTC and BCC have the same profitability ,which can be tracked herefork.lol. Hence they both have roughly the same amount of hash power fork.lol/pow/hashrate. Since BCC has had multiple EDAs, it is able to generate 25 blocks/hour vs BTC 4 blocks/hour with the same hash power.
Now what happens if the prices of BTC or BCC falls.
1) if the price of BTC falls (10-20%), BCC becomes much more profitable and most of the hash power will move to BCC. Since BTC does not have EDA, it will go into a nuclear winter of its own and may possibly die due to low transactions and low miner profitability. so it is essential that BTCs price does not fall for its own survival. There is a lot of motive to prop up prices for the companies supporting BTC
2)The above is not the case for BCC if its price drops, it has EDA. if it price falls by 50%, it just needs 12 hours more to correct the difficulty to make it profitable. There is a motive to prop up the price here as well, just not as much as BTC.
The side effect of the EDA is that BCC will have breakneck speed for 2-3days followed by 12-24 hours of very very poor speeds. which is not optimal.
In the end, i feel both prices are proped up. I am also not happy with what this war means for cryto.
Would be happy to be corrected if any of my data points are off.