Now, that Bitcoin (Cryptocurrency: BTC) has surpassed $100,000, leading some investors to wonder if the world’s most popular cryptocurrency will split. After all, popular tech stocks are always split up, primarily to keep prices attractive to the average investor.
Indeed, Bitcoin at a price of $100,000 causes quite a shock. But is a Bitcoin split possible? And if so, would you really want to hold it?
Stock splits generally occur when the price of a stock is determined to be too high for the average investor. In the case of a stock split, the market capitalization of the entire stock remains unchanged. For example, in a 2-for-1 stock split, the number of shares would double, but the price per share would be halved. So if you owned 500 shares of a company worth $2 per share, you would now own 1,000 shares of that company worth $1 per share.
In most cases, splitting your cryptocurrency is not necessary. For example, one Bitcoin can be divided into 100 million units called satoshis. Therefore, even if the price of Bitcoin is $100,000, an investor is not obligated to spend $100,000 to purchase a full Bitcoin.
Some cryptocurrency exchanges allow you to purchase as little as $1 worth of Bitcoin if you wish. For example, if you invest $1,000 in Bitcoin while the cryptocurrency is trading at $100,000, your account will simply show that you own 0.01 Bitcoin (or 1/100 of a Bitcoin). Masu.
Image source: Getty Images.
In theory, a Bitcoin split could occur. However, this would be nearly impossible to implement, as it would require changes to the underlying Bitcoin source code and would require consensus from the entire Bitcoin community.
And because Bitcoin is a fully decentralized digital asset, achieving that level of consensus is difficult. There is no chief executive officer, no board of directors, and no headquarters. In fact, we don’t even really know who created Bitcoin. (The only person we know is the pseudonym: Satoshi Nakamoto.)
Therefore, it is unlikely that Bitcoin will be split in the manner of a stock split, as it will probably be impossible to get the majority of the global Bitcoin community to agree on changes to the underlying code.
That being said, cryptocurrencies undergo certain changes called hard forks, which can loosely be called splits as they cause a split in the blockchain. These forks occur when members of the developer community become dissatisfied with the progress of a cryptocurrency and put together suggestions to improve the underlying blockchain code.
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If these proposals gain enough traction, they could lead to a blockchain hard fork. At that time, the main blockchain is split into two blockchains and new tokens are created for the newly created blockchain. Since then, there have been two blockchains and two tokens (one for each blockchain).
And in fact, since its launch in 2009, Bitcoin has forked nearly 100 times. Most of these occurred in the early days of Bitcoin, resulting in small changes designed to improve technical aspects of Bitcoin (such as data volume). Must be contained within a single block of the Bitcoin blockchain.
That’s why we have Bitcoin Cash, for example. (Code: BCH)with a market capitalization of approximately $8.7 billion (compared to Bitcoin’s $2.1 trillion), ranking it as the 21st most valuable cryptocurrency. However, of the 100 or so Bitcoin forks, many are currently inactive or defunct. Investors overwhelmingly prefer the original Bitcoin.
There has been considerable confusion surrounding Bitcoin’s halving in 2024. Some media incorrectly described this as a Bitcoin split, as the name made it sound like Bitcoin itself would somehow be halved. In the minds of some investors, this must have sounded like a 2-1 split.
However, the Bitcoin halving represents what will happen to the rewards paid to Bitcoin miners. The amount of Bitcoin rewards paid to miners is cut in half every four years. This has the practical effect of slowing down the creation of new Bitcoins. These are all determined by Bitcoin’s algorithms, which cannot be changed by companies or government agencies.
That’s why Bitcoin is so attractive to many investors. We know exactly how much Bitcoin is in supply, how much is produced each year, and what the lifetime supply of Bitcoin will be. The maximum lifetime supply of Bitcoin is set at 21 million coins.
At the end of 2024, BlackRock will (New York Stock Exchange: BLK) Published a 3-minute Bitcoin explanation video. This video went viral on social media and went viral for that simple reason. That’s because it suggests that Bitcoin’s lifetime maximum supply may need to change in the future.
BlackRock has probably suggested that since the demand for Bitcoin is so high and the supply so limited, it might make sense to increase the supply of the coin to attract new investors. Sho.
As expected, even hints about changes in Bitcoin supply caused an absolute uproar in the cryptocurrency community. It is impossible to fully convey how important the 21 million cap is for Bitcoin. In the minds of many Bitcoin purists, changing this rule would fundamentally change the idea that Bitcoin is a digital currency that is not affected by outside forces.
Therefore, it is unlikely that Bitcoin will split. A hard fork of Bitcoin may occur in the future. And Bitcoin halving will continue every four years until 2140. However, changing the total lifetime supply of Bitcoin is definitely out of the question.
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Dominique Basurto has a position in Bitcoin. The Motley Fool has a position in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Can virtual currency be divided like stocks? The answer that may surprise you was originally published by The Motley Fool
