A two year battle to upgrade the bitcoin software is ending on August 1, 2017 and bitcoin might split into two separate coins. The bitcoin we know and love will continue to be called bitcoin and the vast majority of the users, exchanges, miners and developers will continue to support it. However, there is another group that is planning a different type of upgrade which appears likely to cause a split of the coin. This second ‘bitcoin’ will be called Bitcoin Cash and might trade under the symbol BCC. There is an opportunity to make money on this split, but you have to know where to keep your bitcoin.
If you hold bitcoin on August 1, 2017 you will receive an equal amount of Bitcoin Cash. For example if you currently hold 10 bitcoins you will also receive 10 Bitcoin Cash. An easy way to think about this is like a one time dividend paid by a stock – except instead of getting US Dollars you are getting another currency called Bitcoin Cash.
Does This Mean I have Double the Amount of Money?
In short no, but it is highly likely that by simply holding bitcoin and receiving Bitcoin Cash you will have more money than you started with. Here’s why. There is a futures market for Bitcoin Cash (the new coin) that is indicating the price of Bitcoin Cash is ~$400. Therefore if you own 10 bitcoin (currently worth about $28,000) you will also receive 10 Bitcoin Cash (indicated to be worth about $4000). This is very similar to getting a 14% special dividend.
But Here’s the Catch
You might not get this “dividend” if you hold you bitcoin at some exchanges and wallets. Previously I have suggested the easiest way to buy and hold bitcoin was to use Coinbase. However, Coinbase has announced that they will not support Bitcoin Cash and therefore they may not distribute Bitcoin Cash to customers holding Bitcoin. You can read the statement here. Since I have previously recommended Coinbase as a solution I believe I have an obligation to let people know what to do now.
What Do I Do?
My recommendation to friends and family has been to move their Bitcoin holdings off of Coinbase to Xapo. Xapo is a bitcoin wallet services that has announced they will distribute Bitcoin Cash to everyone holing bitcoin in a Xapo wallet. Xapo will even sell the Bitcoin cash for you and credit your account with the equivalent amount of Bitcoin.
There are other options for wallets outside of Xapo and Coinbase, but I find these two to be the most user friendly. Also, I want to be clear this is not to pick Coinbase – there is some very complex technicalities that are occurring with a very short time period. I understand why Coinbase has made this decision.
Nonetheless, as the “Bitcoin Guy” who recommended using the service it’s my duty to let people know what is happening. After August 1, 2017 I will continue to use Coinbase as a bitcoin wallet and exchange.
When Do I Need to Do this?
NOW!! Most exchanges and wallet services are going to halt operations sometime on July 31, 2017 and not reopen until August 2, 2017 after the split has occurred.
Is my Bitcoin Safe?
YES! As I mentioned this is very similar to one time dividend payment and all funds stored at reputable and professional wallet services should be safe.
What Happens After August 1, 2017?
It’s business as usual. Bitcoin will continue to operate 24 hours a day seven days a week just like it has since 2009. Bitcoin Cash may also continue to operate but there is no guarantee of price or that it will gain traction. This is a necessary growing pain in the maturation of the bitcoin ecosystem. My personal preference would be for a split not to occur; I believe the split could have a short term negative sentiment bias for bitcoin.
It’s worth repeating, there is no guarantee of a split or that Bitcoin Cash will be worth anything, but holders should be aware of what is going on. As well, Coinbase may decide to distribute Bitcoin Cash to holders of Bitcoin, but as of this writing that does not appear to be the case.
Don’t fret, BK is still a Bitcoin Believer! Once we get through this speed bump the fun will resume.