Bitcoin has split into two digital currencies, leaving investors and expert contemplating the investment implications, namely how much the new “bitcoin cash” is really worth.
According to data from Coinmarketcap.com, bitcoin cash has dropped 30% over the past day to just over $288 a coin. That’s down from its all-time high of $727 set on Wednesday, a day after its debut.
Tim Shirata, a partner at Guild Investment Management, offered up this warning today.
After any fork, the behavior of the new coins that arise from the split will be difficult to predict. Although holders of bitcoin who now also hold bitcoin cash have come out ahead, future forks could even precipitate a collapse in bitcoin and the rise of a rival, such as ether, which is already nipping at bitcoin’s heels in terms of market capitalization.
Should you buy bitcoin, bitcoin cash, or both? Shirata leaves that decision up to you. But he noted that investors should take care to consider whether they want to hold their bitcoins locally or in a virtual wallet.
Speculators who are considering entering bitcoin should watch the news carefully for information about disruptive events surrounding potential forks. Speculators may also consider diversifying into other coins in the run-up to a bitcoin fork. We stress again that at this juncture, we consider digital currencies to be extremely risky but interesting speculative opportunities — not investments.
The split, or fork of the bitcoin blockchain, which took place earlier this week, stemmed from a schism between rival factions who couldn’t come to terms with how the cybercurrency should work.
Those who own bitcoin will continue to own the old version and also own the new bitcoin cash. Some say the split is just what the cybercurrency needs and investors could profit benefit from speculative rallies following the fork. But as Bloomberg’s Matt Levine noted earlier this week, “you should not expect bitcoin markets to operate sensibly.”
Coinbase and GDAX, two of the world’s largest digital currency exchanges, have decided to support the new bitcoin cash, according to CNBC. But there is a catch. Customers will have to wait until January 2018 to gain access to their tokens.
For more on the bitcoin split, read these free blog posts.
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