Bitfinex opens deposits
Following a difficulty drop which stabilized the network, Bitfinex announced the opening of Bitcoin Cash deposits and withdrawals. While several smaller exchanges had already enabled Bitcoin Cash funding, Bitfinex has become the first major exchange to do so. They are requiring 20 confirmations before Bitcoin Cash deposits are credited.
The Bitcoin Cash network was practically non-functional for the first 48 hours because of the high mining difficulty. Bitcoin Cash inherited Bitcoin’s mining difficulty, but only attracted around two percent of Bitcoin’s hash power. This resulted in extremely long block times.
A vulnerable network
The combination of long block times and limited hash power made the Bitcoin Cash network vulnerable to attack. A large Bitcoin miner, for instance, could have decided to attack Bitcoin Cash by mining on its Blockchain but withholding any blocks that were found. Once the attacker had created a longer chain than the legitimate network, the attacker could release their blocks all at once. This is called a Blockchain reorganization.
If this had happened, the Bitcoin Cash network would accept the longer chain as valid, and all prior transactions would have been wiped out. This still remains a threat, which is why Bitfinex is requiring 20 confirmations before deposits are credited. It would be non-trivial for even a very large miner to secretly mine a chain long enough to “reorganize” a full 20 blocks.
Further drops expected
As expected, now that Bitfinex and several smaller exchanges have opened Bitcoin Cash deposits, the price of Bitcoin Cash has dropped precipitously. At press time, the price of Bitcoin Cash has dropped by 40 percent in the last 24 hours, with even greater decreases likely.
In addition to opening up Bitcoin Cash deposits and withdrawals, Bitfinex also enabled margin trading on the currency. This enables traders to short sell the asset, which is likely to further lower its price. Users on the /r/BitcoinMarkets subreddit have noted large quantities of Bitcoin Cash being moved in recent blocks, likely to exchanges in order to be sold.