Bitcoin Cash

Miners Manipulating Bitcoin Cash’s Circulating supply

Bitcoin Cash, after it got forked off from Bitcoin blockchain, experienced  tremendous growth in price as well as in overall adoption by the traders. The coin became very popular and quickly rose to 4th position (by market cap) among cryptocurrency platforms. This can largely be attributed to the heavy promotion by early Bitcoin adopter Roger Ver and powerful miners like Jihan Wu.

However, now the coin faces a serious problem after the recent findings by some crypto enthusiasts that a huge stash of the coins is hoarded in a handful of wallets mostly controlled by the Miners. Let’s investigate further to know more in detail about the “rich wallets” as well as the future of this coin.

 Bitcoin Cash Fork History

In 2017, Bitcoin faced scaling issues and the solution for fixing it was highly politicized. The core developers wanted a soft fork (Backward compatible software upgrade) in the form of Segwit, which is the process by which blocks on a blockchain are made smaller by removing signature data from Bitcoin transactions. However, the miners and other prominent people like Roger Ver wanted a hard fork (block size increase) to accommodate more transactions. There were numerous arguments and cold wars between the two groups to decide on the best possible approach for Bitcoin to scale.

After 2 years of prolonged debate, all the stakeholders came to a scaling agreement in New York, famously referred to as “the Silbert Accord” or “SegWit2x”. The agreement accepted for both a soft-fork and a hard-fork in the months of August and November respectively. However, in a surprising turn of events, after Segwit got activated on August 1st, 2017, Roger Ver and Jihan Wu immediately decided to fork off from the Bitcoin blockchain and increased the block size of the forked coin to 8 MB. This forked coin is Bitcoin Cash and it gave birth on August 10th 2017.

Bitcoin Cash Growth

The coin grew very fast in terms of price and marketcap, with the able support from Roger ver and Jihan Wu. Miners gave a huge hash power to Bitcoin Cash, ignoring the Bitcoin blockchain. Also, there were a lot of spam attacks by miners on the parent blockchain filling up the mempool, making the transactions slow and costlier. Since the transaction fees were so high, people started to move to Bitcoin Cash, which was faster and cheaper. Roger Ver also aggressively promoted it and orchestrated many artificial pumps to increase the market cap of the coin.

All these factors positively impacted the price of Bitcoin Cash, and hence, it was able to capture significant market share and is currently trading at  .11 of a Bitcoin at the time of writing. It even reached a value of  1/4th of a Bitcoin at its peak, when it was believed to be pumped heavily. Moreover, Roger Ver took extra efforts in getting the help from exchanges, wallet providers, and other crypto service providers to support and adopt the coin. Also, he made sure that the coin gets listed on all the major exchanges across the world. He even tried to create brand confusion by referring to Bitcoin Cash as Bitcoin and diverting the noobs to the former. Notably, on his personal website, the parent blockchain is being called by some unknown names like “Bitcoin Core”

Controlling the Circulating Supply :

Almost everyone in the crypto space knows that Bitcoin Cash has been heavily supported by Roger Ver and Chinese Miners in general, but recently one Medium Post has come up with a shocking revelation that the miner Jihan Wu is controlling the circulating supply of the coin by hoarding huge amount in wallets. Also, the coins mined are stashed in the wallet without selling them to the exchanges. The post further mentions, in detail, about the amount of Bitcoin Cash held in that wallet. Below are the details mentioned in the post:

  1. Bitmain’s BCH Sales Wallet – This wallet holds 2.6% of all Bitcoin Cash in circulation with 441k BCH.
  2. “Unknown BCH Mining Wallet #1” – This wallet is speculated to be held by ViaBtc or Antpool (mining pools controlled by Jihan) and currently holds .28% of the coins, that comes to a total of 47,421 BCH.
  3. Unknown BCH Mining Wallet #2 – This wallet is also said to be held by ViaBtc or Antpool (mining pools controlled by Jihan) and hold around .58% or 88,855 BCH in total.
  4. Unknown Wallet  – A newer wallet and this appears to be a sales wallet holding 78.5K BCH

With all the holdings, if we add together, we get a staggering amount of 650k BCH. So, it seems quite likely that Bitmain and Roger Ver are controlling the Bitcoin Cash supply to pop-up the price artificially.

Liquidation Problems Faced By These Wallets

The above wallets are used to stash the coins that came as a mining reward, and they have not sold a single coin from it. Moreover, Roger Ver and Jihan Wu are believed to be artificially supporting the price of the coin by holding them in wallets without circulating them. The problem arises here since we are in a bearish trend currently, and Bitcoin Cash has lost almost 81.5% of its value from previous highs.

Furthermore, the above-mentioned miner wallets lost a few billions in paper value due to the bearish trend prevailing for the past two months. The pressure is already felt by Jihan Wu and that is evident from this tweet, where Bitmain announced that they are accepting USD in addition to Bitcoin cash for selling mining equipment. This is because their liability in BCH has grown big enough that they no longer can take only BCH as payment. Miners are also not getting enough fees from Bitcoin transactions since the fees are very low in recent times, due to batching and SegWit adoption by major exchanges and wallets. If they have the additional revenue from Bitcoin, they could use it to buy more BCH and support the price.

The major problem Bitmain will face is when they try to liquidate the BCH holdings.  The reason is that the BCH doesn’t have a good OTC market to sell like Bitcoin and also its volume in the exchanges are quite low. So selling on on/off exchanges is a challenge. Moreover, all the BCH traders are watching the above four wallets closely, and if they sense any movement of the coins from the above address, then there will be panic selling across the board.

Maintaining the Price Floor

The medium post also brings out the evidence that the BCH supporters maintained the price floor in the range of 1200$ for a long time by artificial market manipulation and this is evident if we watch the order book of BCH (In Bitfinex exchange) closely. The BCH price was kept competitive artificially. The liabilities are very high and one cannot maintain this price floor permanently and the price will sink at any time in future.

So, one needs to understand that BCH price has been artificially maintained at a higher level by these entities and they are sitting on anywhere from 664k to 1.33 million BCH (Taking top 15 BCH rich list) that they currently have no way to actually sell. This is very inorganic and not healthy for BCH and crypto space as a whole.

We can summarize by saying that Bitcoin Cash seems to have a very bleak future due to the above-said reasons, and one should trade cautiously since the circulation is highly manipulated.