After the Bitcoin Cash halving, the price of the coin fell, even though the expert community predicted not only growth, but also a continuing upward trend. The BCH price was supposed to be stimulated by a reduction in the issuance of new coins. However, this event failed to live up to investors' expectations. Why? And could the results of the Bitcoin Cash halving signal traders' cautious optimism about the prospects for bitcoin itself after the reduction of its issuance?
Here are some factors that could be behind the drop in BCH after the halving:
1. Declining investor interest and the speculative nature of the market. The reduction in miners' block rewards could not make up for weakening speculative interest in BCH. This sends a signal that investors do not believe in fundamental growth factors but are focused more on short-term market sentiment.
2. Perhaps euphoria surrounding the halving event was fueled more than the real prospects of the coin. The weak price dynamics of BCH could also be due to the fact that BCH growth YTD was more than 200% before the halving. In addition, keep in mind that Bitcoin Cash ranks 13th in the Coinmarketcap ranking, and the demand for it is several times less than for BTC. The coin has a correlation with BTC of approximately 0.76x, indicating a strong dependence on BTC/USDT dynamics. And Bitcoin's growth was limited by the dollar's rally after rising inflation and escalating conflict in the Middle East.
3. Increase in production costs. A drop in the BCH block reward could increase miners' costs, forcing them to sell coins more aggressively to cover costs; this also put pressure on the price of the asset.
Overall, the case of Bitcoin Cash shows that a reduction in issuance alone does not guarantee an automatic increase in the cryptocurrency price. Investors and traders are waiting for more fundamental drivers than technical changes to the protocol. Therefore, the results of the BCH halving may indeed signal the need for more tempered expectations regarding the bitcoin price action following a similar event. BCH without a BTC rally will not be able to show a steady uptrend on its own.