Introduction

In January 2024, Bitcoin ETFs were officially approved for listing in the U.S. Shortly after, driven by massive over-the-counter fund inflows, Bitcoin’s price surged dramatically, breaking previous all-time highs and reaching a peak of $73,700. Despite several months of market correction due to various factors, Bitcoin continued its upward momentum in December, unprecedentedly surpassing the $100,000 mark. In contrast, many assets closely correlated with Bitcoin, such as forked coins, on-chain scaling solutions (sidechains, Layer 2, etc.), and inscriptions, not only lagged behind but in some cases showed declines independent of the broader market rally. What accounts for this phenomenon? This article will thoroughly explore this issue through two prominent projects, BCH and FB.

BCH Introduction and Analysis

Project Overview

Bitcoin Cash (BCH) is a blockchain created as a hard fork from the Bitcoin network. Led by Bitcoin ABC, which supported the large block approach, BCH officially launched on August 1, 2017. As an improvement project for the Bitcoin network, BCH employs several technical methods to increase the block size limit and enhance script functionalities, thus improving the network’s throughput and scalability while reducing transaction costs.

Price Performance

BCH has shown a strong correlation with Bitcoin’s price movements in the current bull market. In January 2024, following Bitcoin’s price surge, BCH also experienced a sharp increase, reaching its highest point in recent years (around $700) in April. However, this price still remains far from the previous bull market’s peak (around $1,500) and is insignificant compared to its historical high of $3,785. Subsequently, BCH entered a consolidation phase alongside Bitcoin, dipping to levels similar to those seen in 2023. Recently, as Bitcoin rebounded, BCH briefly rose to around $600 but soon reversed into a downtrend. As of this writing, BCH’s trading price is in the $400-450 range.

Annual Price Performance of BCH (Source: CoinGecko)

Project Analysis

There are several key reasons why BCH has underperformed compared to Bitcoin in this bull market:

Firstly, as a fork of the Bitcoin network, BCH has not overcome the inherent limitations of Bitcoin’s code. Its scripting language is not Turing-complete, which means it cannot support more complex applications. Compared to Ethereum, which was developed around the same time, the BCH ecosystem is relatively underdeveloped. Besides its basic store-of-value and payment functions, BCH supports only a handful of applications, such as data storage, basic decentralized exchanges (DEXs), NFT protocols like CashTokens, and social platforms like Memo Cash. Furthermore, after introducing the Ordinals protocol on the Bitcoin network, there was a surge in asset issuance on Bitcoin, while the SLP (Simple Ledger Protocol) on BCH failed to gain similar traction. The limited number of on-chain applications is a key factor behind BCH’s insufficient demand.

BCH’s historical data for large on-chain transactions shows its activity has gradually diminished. (Source: OKLink)

Secondly, BCH has struggled to keep up with the ongoing process of cryptocurrency market regulation and mainstream adoption. As a non-interest-bearing asset, BCH lacks staking and mining channels that could generate yields, and it has not been classified as a security by the U.S. SEC. Certainly, this allowed BCH to avoid regulatory hurdles in recent years. In contrast, tokens like XRP and SOL saw increased popularity due to expectations of relaxed cryptocurrency regulations under the Trump administration. BCH, however, did not capitalize on this trend. Given its high similarity to Bitcoin, traditional financial institutions have not shown significant interest in BCH, with only a handful of smaller crypto funds incorporating it into their portfolios. In conclusion, BCH has gradually fallen behind in its efforts to align with mainstream financial markets.

Grayscale BCH Trust Fund Information (Source: Grayscale)

Lastly, the absence of key influencers has also played a significant role in BCH’s struggles. Initially, BCH was led by Roger Ver, the founder of Bitcoin.com, also known as “Bitcoin Jesus,” alongside Jihan Wu, co-founder of Bitmain and one of the most influential Bitcoin miners. However, Ver has recently become entangled in legal issues, including tax evasion allegations, and after being released on bail, he grew disillusioned with Bitcoin’s development, ceasing to support it publicly. Meanwhile, Jihan Wu, after becoming embroiled in several political disputes within Bitmain and the BCH community, has stepped back from the spotlight, becoming less vocal than before. The departure of these core figures has led to a loss of momentum within the BCH community, and the consensus around BCH has gradually weakened.

FB Introduction and Analysis

Project Overview

Fractal Bitcoin (FB) is a Bitcoin-native scalability solution developed by the team behind the popular Bitcoin browser extension wallet Unisat. Its founder, Lorenzo, is also the founder and CEO of Unisat. Unlike other sidechain or Layer 2 projects, FB uses the core code of Bitcoin Core, cleverly applying the concept of “fractals” to enhance Bitcoin’s network scalability while maintaining architectural and security consistency with the Bitcoin network.

Price Performance

The FB mainnet officially launched on September 10, 2024, with its token nearly simultaneously issued. The token’s price soared Initially driven by market enthusiasm, with an average trading price of around $30, peaking at $40. However, as market interest quickly waned, FB’s price followed a steep decline with almost no rebound. As of the time of writing, FB’s trading price is approximately $2.

FB Price Trend Since Launch (Source: CoinMarketCap)

Project Analysis

Despite high expectations for FB, its performance post-launch has been disappointing. Several factors may explain this:

Firstly, FB was developed to solve the significant strain the Bitcoin network experienced during the 2023 inscription craze. Unisat, as one of the largest platforms for inscription transactions, initially focused on enhancing the trading experience for BRC-20 protocol assets and related assets. However, as the craze subsided, its successor, Runes, failed to reignite market interest, leading to a decline in the market value of these assets. By the time FB was launched, the Bitcoin-native asset market, which had once been thriving, had already cooled, leaving FB with limited opportunities to capitalize on the trend.

Price Trend of Leading Bitcoin Inscription Asset ORDI (Source: CoinMarketCap)

Secondly, the development of FB’s ecosystem is closely linked to its capacity to support complex applications. Since the launch of its mainnet, only a few applications have been developed on the FB network, most of which are closely associated with BRC-20 protocol assets. Applications such as decentralized exchanges (DEXs) and stablecoins, which can potentially serve real users, have yet to be created. This absence of practical use cases has contributed to a decline in market expectations for FB.

Current Applications Built on FB Network (Source: Rootdata)

Lastly, FB’s tokenomics has also played a crucial role in its initial price performance. In its tokenomics model, 50% of FB will be mined through Proof of Work (PoW). Since tokens allocated to the team, advisors, and early investors are locked up, the current circulating supply comprises mining rewards and airdrop incentives from the Bootstrap plan. Because FB mining can operate alongside Bitcoin mining, a large amount of hash power from major mining pools has been directed towards FB mining. To quickly liquidate, miners have been repeatedly selling their rewards. Additionally, most early airdrop recipients have sold off their tokens for profit. In short, a large portion of FB’s early circulating tokens has turned into selling pressure, significantly limiting any upward movement in FB’s price.

FB Mainnet Historical Merged Mining Hashrate Trend (Source: Unisat Explorer)

Conclusion

Although projects within the “Bitcoin ecosystem” are closely tied to Bitcoin, many of these initiatives have substantially underperformed relative to Bitcoin itself. The market is discerning, and capital is its vote; only those projects that create genuine value for the Bitcoin ecosystem and the wider crypto market will gain market respect. Being classified as part of the “Bitcoin ecosystem” alone does not guarantee inherent value. As Bitcoin continues to break new ground and integrate into mainstream society, we hope that more successful projects within the Bitcoin ecosystem will emerge. Let’s look forward to this together.