Bitcoin Cash (BCH) came to life after the fork on August 1st. Its value was $249 on August 2nd and is now $460. Of all Bitcoin holders who inherited Bitcoin Cash after the fork, only 26% have actually been moved or spent - that’s almost $6 billion in free money being lost or still waiting to be spent.

Changes in the blockchain protocol create the opportunity for multiple new chains to have a common transaction history. This is commonly referred to as a fork. The most contentious fork in cryptocurrency happened on August 1st when Bitcoin Cash was created by forking off of Bitcoin. Bitcoin Cash has experienced marked volatility in both price and hash rate. For this reason, it marks a perfect experiment to study the effects of changing the rules of the game while giving everyone a common history to start from.

The majority of transaction volume over the last three months has been driven by newly acquired coins. Moreover, almost 70% of Bitcoin Cash coins are spent within 6 hours of being held. The behavior of spending coins quickly and rarely holding them for more than a week, clearly indicates that the demand for Bitcoin Cash is driven by highly active, profit-motivated market influencers.

Billions in Free Money Being Lost

There were two distinct ways to get hands on Bitcoin Cash: either they were inherited by virtue of owning Bitcoins prior to August 1st, or they were bought and/or sold after the fork.

Only 26% of inherited Bitcoin Cash has been spent as of October 23rd (see below). This means that the remaining 74% is sitting in various wallets and exchanges as unused Bitcoin Cash reserves (worth $5.7 billion). This can be a result of any of the following: people are unable to access their Bitcoin Cash, people are unaware that they have Bitcoin Cash, or simply, the Bitcoins were lost.

First Movers and BitGo

The daily BCH transactions volume of inherited BCH has progressed slowly since the beginning of September but had two major spikes in August. The first one was on August 4th when 0.6 million BCH (worth $150 million) were spent — indicating that people were aware of the fork and actively chose to sell their new BCH coins. The second spike happened on August 30th when the transaction volume rose 417% (worth $350 million) — 93% of this volume stemmed from multi-signature transactions. On the same day, BitGo, which was the first wallet to support multi-signature, announced its support of BCH.

Coins Being Spent Within 6 Hours

When looking at the coin age of the inherited coins being spent, they were actually not that old. Almost 70% were owned for less than six months and 20% for less than a month. This indicates that users who spent inherited coins tended to spend only recently acquired coins.

Almost 80% of BCH coins spent immediately after the fork were acquired within 6 hours. This trend continued over the subsequent months; 70% of all coins spent (on average) were held for less than 6 hours.

BCH Miners are Keepers

In the previous blog post, the supply of Bitcoin Cash was determined largely by automatic, mining-difficulty adjustments, which incentivize profit-motivated miners to switch to the Bitcoin Cash chain even when its price fall. This time, Chainalysis tracked coin generation and calculated the unspent coins between BCH and Bitcoin. The Bitcoin Cash miners hold 45% compared to Bitcoin miners who have 33% unspent. This indicates that Bitcoin Cash miners’ “spend or hold” strategy results in lower liquidity than Bitcoin and is therefore harder to sell.

The fact that less is being spent by miners on BCH could be driven by four indications: 1) it is a smaller portion of their overall profits, and they do not need to spend this to sustain activities, i.e., it is not their main source of income; 2) there is less demand for BCH therefore the coins are harder to sell; 3) they are holding on to coins for speculative purposes, i.e. they are forfeiting short-term profits for the possibility of seeing greater future gains; and 4) they are mining BCH for ideological purposes.

Day Traders Paradise

In sum, most transaction volume activity on Bitcoin Cash is driven by new coins since only 26% of coins held since the fork have been spent. This indicates that the majority of the activity on the Bitcoin Cash chain is driven by active market players that are either mining Bitcoin Cash or participating in high frequency trades of coins owned for a very short period of time.