Coinbase stunned the cryptocurrency world on Tuesday evening by announcing that it would add full support for Bitcoin Cash, a payment network that split off from the mainstream bitcoin network in August. Coinbase users can send and receive Bitcoin Cash coins, and they'll soon be able to buy and sell them as well.
The news sent the value of Bitcoin Cash soaring more than 30 percent, from $2,800 to $3,800 per coin. Trading on Coinbase's cryptocurrency exchange, GDAX, briefly showed a much bigger gain, with Bitcoin Cash prices as high as $8,500 before trading was suspended. Other exchanges have not shown Bitcoin Cash prices that high, suggesting that these high prices may have merely been a technical glitch. At publication time, the price of Bitcoin Cash was around $3,300.
Meanwhile, the price of conventional bitcoins fell from $17,800 to less than $16,000—a decline of 10 percent—in the wake of the Coinbase announcement. It has since regained some ground and is now worth $16,800.
Markets reacted strongly to the news because Coinbase's endorsement could provide a big credibility boost for Bitcoin Cash. Bitcoin Cash supporters have been arguing with supporters of the conventional bitcoin network over whose version of bitcoin better reflects the vision of bitcoin founder Satoshi Nakamoto. Coinbase has millions of users, many of whom haven't ventured beyond the relatively safe confines of the Coinbase service. They now have the option to purchase Bitcoin Cash alongside the other cryptocurrencies Coinbase supports: regular bitcoins, litecoins, and ether.
If Bitcoin Cash continues to gain ground on vanilla bitcoin, the two currencies could eventually reach a tipping point where the lower fees on the Bitcoin Cash network give it a decisive advantage. If both networks are largely supported by the same companies and they have roughly comparable market values, then users might see little reason to pay the higher fees on the mainstream Bitcoin network.
On the other hand, Bitcoin Cash might never catch up to bitcoin proper. Bitcoin Cash enjoyed a similar rally last month after it became clear that the mainstream bitcoin network would not increase its block size any time soon. The value of Bitcoin Cash doubled in a matter of hours while bitcoin's price slumped. But that shift did not prove to be the beginning of a trend. Bitcoin Cash subsequently lost ground against bitcoin and has remained far below bitcoin's value ever since.
