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.”
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