Why Bitcoin Forks May Be Better Than Stock Dividends
The capital gains of holding onto your precious stocks may be going the way of the dinosaur with the bullish crypto market in 2019. Bitcoin has surged over 4,000% from the start to end of 2019, making it one of the most profitable currency investments in history. One may think that it is a good idea to dump their coins instead of holding for the future, but it can actually be very profitable to hold instead of sell.
With the release of Bitcoin Cash, Bitcoin Gold, and various other copies, it has essentially given Bitcoin holders a share of new altcoins within their Bitcoin addresses. Although many coins may be had only with a few bucks, there are some that have reached hundreds, or even thousands of dollars per coin.
How does a Bitcoin fork or dividend work?
A hard fork of Bitcoin basically takes the source code, a few unique additions (like a larger block size), and a snapshot of the blockchain from a certain date and it is repackaged as a "new" version of Bitcoin. Some may consider this practice to be a cheap pump-and-dump attempt, but some projects actually aim to become a sincere replacement for the core version of Bitcoin.
There are also altcoin projects that serve as "dividends," although they really aren't in the traditional sense, by issuing a certain amount of coins to Bitcoin holders within a certain date range. In the case of CLAMS from 2014, coins were randomly allotted to Bitcoin and Dogecoin holders (even to empty addresses). Projects like Stellar Lumens distribute coins evenly based upon the amount held in each wallet. Within the Bitcoin community, this practice is referred to as "air-dropping".
Examples of Successful Hard-forks
Bitcoin Cash (BCH) has taken been in the spotlight several times since its release in early August. The project has particularly been popular when Bitcoin transactions have been extremely congested and with high fees since BCH provides much faster and cheaper transactions. It has already the third largest coin in terms of market capitalization, which is just behind Ethereum.
The BCH project claims to be made in the "original vision of Satoshi Nakamoto" with an increased block size to accommodate increased transaction traffic on the network. All users that held onto their Bitcoin on August 1, 2017, had received an identical copy of their wallets on the BCH network. Some have foolishly dumped for a mere few hundred bucks per BTC during the early days while long-term holders have been able to sell off their dividends for well over $3,000 each.
Although not as big as the Bitcoin Cash launch, Bitcoin Gold has held its price steadily since its launch and is even contending with altcoins like Litecoin. Having forked from the blockchain in November of 2017, Bitcoin holders at the time had received a surprise bonus. It has since made it's way too many of the major exchanges and is still actively traded.
Long-term prospects for BTG or any cryptocurrency is hard to foresee, but many graph watchers notice an overall upwards trend that may extend into 2018, 2019 and beyond.
Examples of Altcoin "Dividends"
The Stellar project had a short window of distributing free lumens to bitcoin holder from its launch in June until August 27, 2017, at the rate of 986 Lumens per Bitcoin. At the end of 2017, Lumens were still being traded at nearly $0.30 per token and it is popular among speculators due to the potential of its distributed exchange technology.
ByteBall had been another giveaway for Bitcoin holders with several opportunities held. Every Bitcoin holder had an opportunity to receive one-sixteenth of a BB for every Bitcoin in their wallet. At the end of the year, it had been traded at around $600 each and it had a steady, upward market trend.
How much could have I gained if I held 1 Bitcoin in 2017?
Assuming that you left your bitcoin and left in your private keys and sold all of your dividends by the end of the year, 1 Bitcoin had the ability to produce at least $4,000-$5,000 in free money. This is assuming that you had collected the major coins, Like BCH, BTG, and lumens, and sold at median prices during the year. Percentage-wise, you could have sold these coins for around 20 to 50 percent for the price of BTC, depending on the wild roller-coaster price of Bitcoin from 2017-2019.
How does this compare to the highest performing stock dividends?
Warren Buffet, who loves to rag on the crypto-markets, regularly shares his investments and offers picks of high-dividend stocks. His earnings are always stable and steady, but it is not quite as exciting as the crypto market.
Some of the highest and stable Dividend stocks on the market included:• Omega Healthcare Investors Inc (OHI) - 9.3% dividend yield
• Spectra Energy Partners, L.P. (SEP) - 6.9% dividend yield
• Enterprise Products Partners L.P. (EPD) - 6.4% dividend yield
• Iron Mountain Incorporated (IRM) - 6.1% dividend yield
• W.P. Carey (WPC) - 5.7% dividend yield
• Main Street Capital Corporation (MAIN) - 5.6% dividend yield
• EQT Midstream Partners, LP (EQM) - 5.5% dividend yield
• Brookfield Renewable Partners (BEP) - 5.4% dividend yield
• Enbridge (ENB) - 5.4% dividend yield
• Tanger Factory Outlet Centers (SKT) - 5.3% dividend yield
As you may deduce from the rates above, only a small handful of shares will have a significant amount of dividends to make the investment worthwhile. You must also consider that the typical dividend yield for other big-name stocks may be 2% or less.
Drawbacks of Investing In Bitcoin & Altcoins for Dividend Yields
There is a reason why it's mostly computer savvy nerds and young millennials getting into crypto-trading. There is a lot of pitfalls if the user does not have any technical knowledge.
The average trader coming from Forex or the stock market may not want to deal with the amount of risk and research involving keeping their cryptocurrency secure. Being able to cash out on the latest Bitcoin forks will involve creating new wallets to backup your coins, downloading the forked Bitcoin client, and importing your private keys. Simple mistakes in this process could result in lost Bitcoins.
Of course, the other drawback is that the crypto market is very young and unpredictable. The trading of securities had started in 1817, so there had been enough time for the market to mature and various regulations implemented to give the market relative stability. The crypto market is still like the Wild West and investing is diving into the unknown.
Be Careful When Dealing With New Forks!
The main problem when new Bitcoin forks or dividends are released is that your old Bitcoin wallet must also be imported into the new client. With a new coin, you never know if the client is just a backdoor phishing scheme out to collect private keys that are stuffed with Bitcoins. Because of this, you must constantly rotate your coins to new wallets to reduce the risk. You must also keep in mind that transferring Bitcoin to a new wallet may incur a significant amount of fees, depending on the current backlog of transactions, so make sure that the new coin is worth the cost as well.
The safe alternative is to wait for your current wallet or exchange to implement support for the new fork. Coinbase and Blockchain.info had eventually come around to implement Bitcoin Cash support, but this had arrived many months after its initial launch.
Bitcoin has always maintained an upward growth trend that has been plagued with bubbles and bursts throughout its entire lifespan. Bitcoin price always has its ups and downs on a daily basis, so day trading is incredibly unstable. A purchase of a significant amount of Bitcoin will require patience in the long term, and with even more forks being announced, there is, even more, profit potential if one holds out for months or years before selling.