Why a Bitcoin Fork Is Not a 'Stock Split'steemCreated with Sketch.

in bitcoin •  2 years ago 

From Coindesk

If you've been following the bitcoin fork drama this week, you may have heard the term "stock split" thrown around in interviews with "experts."

Before we get to the problems here, it's true that there are now two publicly traded bitcoin assets, bearing similar names with similar value propositions. They even appear side by side on some major exchanges.

The impulse to use existing terminology as a metaphor to refer to emerging technology is understandable. In fact, it can be incredibly helpful to use existing mental models as a metaphor for things we don't quite have our heads around just yet.

But this comparison, while well intentioned, is misguided: a blockchain fork isn't anything like a stock split.

Here's why:

The drivers

Stock split: The basic motivation behind most stock splits is to lower the price of individual shares of a stock to bring it within the financial reach of retail investors.

One of the best-known examples of a stock split in recent years is the 7-for-1 split of Apple shares in 2014. Prior to the split, when Apple was trading around $700, it was often debated whether the individual stock price was too high. A steep rise in share price in the months that followed seems to have settled the debate. (At least in the case of Apple.)

Bitcoin: The reasons for the split into two cryptocurrencies are complex, but they have nothing to do with ease-of-access for retail investors.

The crux is this: A long-standing debate has divided the bitcoin community on its technical roadmap – specifically, about finding the best way to cope with a growing user base and rising transaction volume.

After the bitcoin fork, bitcoin is still trading at over $2,700, roughly the same price as before. The price of the new asset, Bitcoin Cash, is around $200 to $450 depending on the liquidity of the exchange it's being traded on. In short, the two assets now have two separate values, each derived from their technical roadmap and supporting communities.

Both could end up expensive for investors, but to the extent that one may end up affordable, it may not make it valuable.

Read the rest here: https://www.coindesk.com/bitcoin-fork-not-stock-split/
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This will NOT end well.

good joba dear now me following you and upvoted :) good work

Nice post.

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