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Bitcoin Cash Is Not Free Money

Bitcoin Cash Is Not Free Money

July 30, 2017 Crypto, News
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Ever since the Bitcoin Cash hard fork was announced, many people have viewed its token as “free money.” While it is true these new tokens will be issued to users at no additional cost, they are most certainly not free money. In fact, many people feel Bitcoin Cash will take away some of Bitcoin’s value, just as Ethereum Classic did to Ethereum. Although the value of BCH has yet to be officially determined, it is not free money in the way most envision it.

There Is No Free Money in Bitcoin

The fact that every holder of Bitcoin is entitled to his or her share of Bitcoin Cash tokens does not make it free money. BCH tokens will be issued at a 1:1 rate to Bitcoin. If you own 100 Bitcoin, you will receive 100 Bitcoin Cash. Those new tokens can then be sold on supporting exchanges, either against Bitcoin or fiat currencies. However, the value of these tokens may be effectively subtracted from the Bitcoin price at that time.

Let’s put this into numbers for a minute. One Bitcoin Cash is currently valued at around US$400. These tokens do not exist currently, and IOU values always betray actual prices until the tokens are available in an official capacity. However, assuming they retain their US$400 value when the tokens are live, that means that value may be deducted from the Bitcoin price at that moment.

If one Bitcoin is worth US$2,800 by the time the split happens, and BCH is worth US$400, it is not unlikely Bitcoin would drop to US$2,400 on that day. The value for BCC has to come from somewhere, and deducting it from the regular Bitcoin price would seem the most logical course of action. With two competing forks, the value of the Bitcoin network — the market cap, in this case — will be distributed over the two blockchains. The actual values of both currencies will fluctuate heavily over the first few days following August 1st.

It is impossible to tell how many people will be ditching Bitcoin in favor of Bitcoin Cash. Hashrate is growing as we speak, yet it seems the altcoin will still be a very minor fork for the time being. It is equally possible users will support both Bitcoin and Bitcoin Cash at the very same time. There is no real reason to defect from one chain to the other, as one can easily support both. There will be users who ditch one chain in favor of the other, although it is too early to tell how things will evolve.

All of this hinges on whether or not Bitcoin and Bitcoin Cash will respect Metcalfe’s Law. Cryptocurrency is an interesting market and predicting the future is and will remain impossible. There is no guarantee Bitcoin will lose or gain value when the hard fork occurs, as it is all guesswork at this point in time. The value of Bitcoin Cash will have to come from somewhere, though. There will most likely be some impact on the Bitcoin price, yet it remains to be seen what the repercussions will be.

Free money does not exist in Bitcoin. Even if Bitcoin were to lower US$50 in value and BCC was worth the same amount, there was no free money to begin with. It just meant the existing value got shifted around a bit. Things will not be as cut-and-dry, though, as the value from BCH will most likely cause big losses to Bitcoin in one way or another. This assumes, of course, that Bitcoin Cash sticks around for some time, which may not be the case. Free money does not exist, even though everyone is entitled to the upcoming “airdrop.”

For more info, check out Cryptofundamental’s article.

About The Author

Jdebunt

JP Buntinx is a FinTech and Bitcoin enthusiast living in Belgium. His passion for finance and technology made him one of the world's leading freelance Bitcoin writers, and he aims to achieve the same level of respect in the FinTech sector.

  • It’s free currency.

  • Eli Barnett

    i m just curious to see how all this going to affect the value of other alt coins….

    • SufiyanGhori

      and I am just waiting to see how its gonna affect ETH in particular.

  • concerndcitizen

    You don’t need to take 100% of the value for BCC from BTC or something else to create value for BCC, that’s a fallacy. All BCC needs to do is establish the trading price ON THE MARGIN, it could be with 0.01% of the value of BTC to create value for BCC. There are some mega whales behind the scenes with BCC and exchanges are ready to distribute and start trading. The exchanges that decided to keep the coins for themselves may find themselves at odds with their customers, assuming BCC has more value than a few dollars per coin. Make sure you move your BTC out of Polo and Coinbase (and maybe some others)

    • Some Person

      You are of course correct. Unbelievable just how stupid some people are in this space. The price of BTC is established by the exchanges. A single trade sets the price of BTC. The market price… duh. Forking BTC is not the same as splitting BTC which is what this idiot believes. Did ETC affect the price of ETH? Of course not. Except to cast doubt on the viability of ETH. Plus… ETH and ETC are shitcoins!!! We are talking about BTC!!! There is a very good chance the price of BCC will open at or near BTC! BTC holders are about to double their money!!!! Right on!!!!

      • sudeep

        might be possible that price of BTC == BCC and after sometime 1 BTC == 0.5 BCC and vice versa … ?

        • Some Person

          Is this suppose to be some kind of insight? Speculating on the price of BCC? Congratulations… you realize that BCC might be priced at different values. What is unbelievably stupid is that people assume BCC should be priced relative to BTC. Of course the relative price doesn’t matter. The ONLY thing that matters is the price relative to US dollars… duh. If BTC or BCC are worth zero US dollars… who gives a shit what their relative price is? Just so stupid.

          • concerndcitizen

            Do you trade crypto at all? None of the crypto traders I know care about pricing in USD — it’s a no brainer that crypto will probably continue increasing in value relative to USD. When you have Goldman Sachs saying BTC could be a $3600 item, along with other ibanks, that gets the attention of a lot of people who have been sitting on the sidelines. It’s also very likely that BCC will outpace BTC — that’s the discussion we’re having here.

          • Some Person

            NO… the article and discussion here is about whether BTC must go down if BCH goes up. As if BCH can only be purchased using BTC. Which is what the comment implies. Which is of course idiotic. Was I right? Was I? Duh. I was right.

          • concerndcitizen

            Let’s see. BCH is now at over $900 on bittrex and BTC is at $2706. You forgot about all the free BCH coins that were GIVEN AWAY. Expands the market, just like the Fed printing money. QED.

          • Some Person

            Wow. The stupidity in this space is just astonishing. No BCH was given away. Only BTC holders received BCH. ALL that happened is bitcoin now equals BTC+BCH. Again… only people smart enough to have invested in BTC received the “free” BCH. Everyone else has to BUY BCH which is exactly what is happening. Duh!

      • earonesty

        Lol. BCH is a shitcoin too.b Clam coin was issued the same way as a fork.

        • Some Person

          BCH? Ass sphyncter says what?

          • Paul Russo

            It will have to be called BCH eventually, BCC is bitconnect and number 12 on coin market cap!

      • Martin

        “Forking BTC is not the same as splitting BTC which is what this idiot believes.”

        But they are splitting the network. Either a computer is working on the BTC chain or the BCH chain, it can’t work on both. The utility is in the network, not the token. So the BTC network is going to shrink – right?!

        • Some Person

          Why do people make shit up to try and beat down BTC? Probably because they want their shitcoins to go higher… because they paid so much less for them… and there is so much more room to run for shitcoins? The shitcoin holders are soon going to learn that gold is gold and dog shit is dog shit.

  • hazenyc

    The opposite might happen in fact: if everybody views BCC as “free money” they will rush to sell BCC, depressing its price, in order to buy BTC – buoying its price.

    • concerndcitizen

      Short term, that’s likely and the whales will sit back and enjoy the feeding frenzy, scooping up coins at depressed prices.

      • hazenyc

        perhaps. In the medium- & long-term BCC price will depend on its mining difficulty & marginal cost of production. If miners don’t enter BCC production — AND given the strange difficulty adjustment algo they’re using – the price is likely to remain low.

        • BCC price, long term, will depend on its utility.
          if it scale up to 8 MB then to 16 32, 64 , 128, 256, 512 and 1 GB and beyond, then its utility will skyrocket and the price will do the same.

          • earonesty

            Which is physically impossible. Making it a joke.

          • Jessica Engledow Spencer

            Impossible is such an ugly word when it comes to technology. Perhaps “infeasible” or “improbable” would be more appropriate.

        • concerndcitizen

          BCC is backed mainly by the big Chinese miners. You can check the box for the miners. Because they also do a majority of the BTC mining, there will no doubt be games played on the BTC side, very interesting to watch.

  • jwymanm

    I’m with hazenyc on this. This article should be deleted. It’s a 1:1 giving. Nobody has to sell BTC to buy Bitcoin Cash (I refuse to call it BCC, that coin already exists). It will probably raise BTC’s value by whatever people are able to sell out at. BTC might then dip afterwards when people sell off a little bit to buy other coins/take profit. I haven’t seen airdrops from something like stellar hurt BTC yet, has it? The only value that this will kill is it’s own.

    • earonesty

      The suckers who buy BCH will have their value sucked out and poured into BTC.

  • Nate Martin

    This will play out much like with dividend chasers in the stock markets. Buyers uptick the price in the days leading up to the dividend disbursement, then sell quickly once the dividend is recorded, attempting to make a small profit on the gap between the price and the amount of the dividend. With BTC, the ‘dividend’ is the market value of BCC; so the author is correct: value will be transferred to the new coin, creating a free ICO, if you will. The future benefits of BCC will determine its worth against the benefits of BTC. Only then will we know whether long term profits can be sought.

    • earonesty

      This has happened 3 times before. And it was a non event every time. Media making a big deal out of it this time only because some paid shill are beating drums. How much are “clams” worth today?

  • The writer of this article is either intelectually dishonest or an outright idiot. Either way, shame on him for writting this piece of disinformation.

    The markets are saying you’ll get $400 FREE money for each BTC you own. Deal with it!

    • Martin

      Are you for real? The BTC network is going to split, i.e. it’s going to get smaller. If half the miners work on BCH (or BCC, can ppl chose already) then BTC is going to be worth much less… I suspect BCH will not be worth much, as I do not think many miners will work on it… but who knows.

  • I moved all my BTC out of Coinbase.

    • concerndcitizen

      Good move, you’ve got Coinbase within striking distance in your crosshairs.

      • They have the worst customer service out of any company I’ve dealt with. I moved to Copay.

        • earonesty

          I moved to Gemini

        • Jim Brown

          Copay will not honor BCC eitehr just like Coinbase. I have my BTC in Copay and just found this out.

          • That’s not how it works. At Copay you have control of your own keys.

  • PC Roger

    That’s the problem with a fiat “currency” where nothing is backing it. Since nothing “backs” bitcoin, it’s simply what the current market makes it. It can spin off BCC and still go UP if the market deems it so. No way to evaluate.

    It’s mostly interesting with sites like Coinbase who “don’t support it”. Maybe that just means “we take your BCC and keep it for ourselves”

    • Paul Peters

      The “backing” of a fiat currency is worth nothing more than the collective level of trust toward those who are backing it. If some people trust the stability and certainty of the bitcoin network more than they do banks and governments, well then that’s part of the reason why you have bitcoin prices where they are. One is not inherently better or safer than the other. The US dollar has a history of relative stability but how many other hundreds of fiat currencies over time have not ?

    • concerndcitizen

      Yes, Coinbase customers may be quite upset if BCC has any value. Brian Armstrong once mentioned on a blog that Coinbase holds about 10% of all BTC. That’s quite a lot of BCC they’ll be using their customers BTC to get some free coins for themselves. Quite a profit model, using customer funds like that, sounds like a regular bank….

      • earonesty

        Write it off as a $400 loss. You’ll make a lot more $$$ that way.

    • maxblockm

      If you read what Coinbase wrote, that is clearly not the case. They just said “wait and see,” basically. They have straight us said they will not keep BCC. They said they wwill record BCC, but will wait and see if BCC becomes “viable,” then, if so, it will be distributed.

      “Viable” is a relative term though. I would rather have it in hand. If I can sell it for $1000, that’s better than $0, but I’m sure there will be some extreme volatility, which is where money can be made. If they wait for all that volatility to subside and price for BCC stabilises at $3000, and then they issue the tokes, well, it’s great that they issued them, but I would have rather had them on hand to participate in the volatility.

  • Russell Spears

    Actually I think there’s a huge tax advantage here with Bitcoin cash imagine the moment that cash is created for you and has a specific value already established which I guess is the value of it when you received it.

    Now imagine Bitcoin cash going to zero, it looks like people are going to have a huge tax write-off from this too…

    • earonesty

      I’m writing off all of Coinbase theft as a loss. I can mark that to market faster than I can sell it.

      • Russell Spears

        That is smart….

      • concerndcitizen

        Don’t write it off yet. You’ll see class action lawsuits and people will demand their BCC….it’s over $900 right now. Let’s assume Coinbase has 1m BTC from all their accounts. That’s $900m in value. Quite the business model, use your customer’s money and assets to acquire other assets. Just like the fractional reserve banking model.

  • John B. Andelin

    I disagree with this article, particularly the statement “The value for BCC has to come from somewhere, and deducting it from the regular Bitcoin price would seem the most logical course of action. ” The value of bitcoin is entirely on what people are willing to pay for it, so its “value” doesn’t “come” from anywhere. If good news about bitcoin comes out, and if significant numbers of bitcoin holders decide not to sell, the “value” increases.

    • NotMyCupOfTea

      I’m still confused. Where does the value in BCH actually come from? BCH market cap is nine billion. Where did that come from??

      • Current price of an assets is its current value plus every value increase in the future discounted by the time.

        BCH is worth x today, I believe it will be worth 10x next year, so I’m willing to pay at least x and probably 10x discounted by the fact I need to wait a year to get that increase. And the risk to lose everything or part of it.

        The same is how the price of everything is evaluated.

        • NotMyCupOfTea

          ok thank your for your answer. I guess I’m not asking the right question. Where does the money that is in BCH, come from? I never invested in BCH but I can cash out money. Where did that money come from?

          • Flaim

            When you decide to cash out of BCH the money comes from whoever decides they want to buy your BCH at the current rate on exchanges. So that money given to you comes from or wont be used on BTC or other alt coins. So this article is correct in saying it will reduce the price of BTC as it’s probably BTC holders that would be buying your BCH.

          • If he is smart, he will not exchange BCH for fiat, but for goods and services.
            As soon as BCH become popular, the demand for BCH will grow and people will start accepting it and requesting it for payment.
            I would not be surprised if merchants and service providers would be willing to give large discounts to people and entities paying in Bitcon Cash.

  • Russell Spears

    When we receive Bitcoin cash is it assumed that we receive it the very moment it’s created and so it can only have a value of 0 because what Bitcoin cash is right now value at is not Bitcoin cash cuz it doesn’t exist

  • LIVEDCOIN

    Finally an article that makes some sense.
    The notion that BCH is going to give Bitcoin holders a equal amount of BCH makes no sense economically. It is a huge red flag and I view it as a scam.
    This coin does not even exist yet and when it does you think people are going to jump on something that is a day old compared to Original Bitcoin which is like 10 years out, give me a break.
    They don’t even have the application s built to handle it for users, not even a wallet. Plus people think they can execute fast once the get the conversation. The network is going to be fucked up most likely.
    I bet they wrote the code so they can fuck over everyone who thinks they are going to get free money.
    When you go claim you BCH they are going to steal all your Bitcoin.
    There is nothing legit about this whole thing.
    You might as well send your Bitcoins to a random address cause you won’t see them again anyway.

    • Peder Muller

      The article is based in sense, but your commentary is not. How will they “steal” all your Bitcoin? If you have coins on the Bitcoin blockchain at the time of Bitcoin cash inception, you’re good. Before importing those private keys into a Bitcoin Cash wallet, move the Bitcoin out of them – they will still be good as private keys on the Cash blockchain. They could not possibly steal your tokens on the Bitcoin blockchain because you will have moved the money out of those private keys. All of this is assuming that Bitcoin Cash wallets are just going to send your private keys willy nilly to somewhere else – I find that highly unlikely.
      As for writing the code so they screw everyone, it’s open source. Go check it out.
      Also, it is not a “notion” you will get the equal amount of BCH 1:1 for BTC – it is a fact. It is a fork of the blockchain, that’s how it works. Same thing happened with Ethereum.
      The one point you did make about the network, might be very possible. Instability will be watched closely for the first few days and will likely have a major influence on the price of the thing.
      Finally, what makes this “legit” or not? Sorry, “legit” just rubs me the wrong way, it isn’t even a legitimate word. Bitcoin sure looked like a scam 10 years ago too, “ponzi”, “pyramid”, all by people who either couldn’t or didn’t want to grasp the concepts of blockchain.

      • LIVEDCOIN

        Because there are over 900 Alt. coins to choose from and the only thing BCH has in common with Bitcoin is the completed transactions in its ledger. Just because it is forking the original Bitcoin chain does not make it special.
        As far as legitimacy is concerned BCH undermined itself by offering “free” coins, which are going to be worthless. If it was LEGIT 🙂 and better than all these other coins then the market would reward it as such.
        BCH group threw this thing together half way and it shows.

  • Jessica Engledow Spencer

    The value is primarily coming from the alts, at present. Assuming Bitcoin Cash doesn’t die, it may trade as a hard peg to BTC, with the value of depending on a virtuous circle of hashrate, development, and users.

  • Steve Worrell

    Unfortunately i suspect btc will not attain the long anticipated aug run up due to this fork. Investors will focus their anger on bcc and both it and btc will suffer for. Long term, btc could lose its premier status and be replaced by an alt coin. Maybe DASH.

  • Tim Schutte

    But Bitoin will get back up in no time so then you do have a profit

  • Paul Peters

    Okay it’s not free money but it sure feels like free money when bitcoin cash is worth over $300 and despite that Bitcoin is making fresh highs over $3400

  • John

    . . . and now two weeks later we can all see just how wrong this was.

  • ray rai

    Now bitcoin is reaching $5000 mark and Bitcoin Cash $600. This is more than a free money. Must be written by overly confident and arrogant writer who got tons of Bitcoin Cash. I suggest you to do your homework properly.

  • NotMyCupOfTea

    What’s so great about BCH that lightcoin or 10 others can’t do or much better developed? All BCH has is the blockchain history, basically trying to usurp BTC.