Building this website has been an incredible experience. When we surpassed 20,000 unique visitors in a single month, we couldn’t quite believe it.
Amazingly, this was also only our second full month online.
We begun drawing up plans of exceeding 50,000 visitors the following month, 100,000 for the month after etc. However, what we didn’t anticipate was the rapid development of the Cryptocurrency YouTube space.
The influx of investors into the market created an excess demand for good quality information. Most of these new investors went to YouTube for this.. unfortunately.
While there are several excellent ‘Crypto YouTubers’ creating content (Coin Crunch, Blockchain Brad, Crypto Candor and more), there were many more who were actively leading investors astray to s**t projects.
Why do they do this?
Because they’re paid to do so by these projects.
Don’t get us wrong, there is nothing wrong with sponsored content. In fact, this is how we know make our salaries.
The issues arise because most Crypto YouTubers create sponsored content which isn’t disclosed as sponsored and is often heavily biased.
Regular investors who needed the most help when investing into this confusing market were being fed s**t information, causing them to lose out financially.
This caused us to make the switch to YouTube.
I’ll be honest and I’m not going to pretend that the switch of our focus was only for altruistic reasons.
Simply put, we made the switch because the audience is larger on YouTube and it’s easier to connect with all of you on a more personal level.
A larger audience is great for two reasons:
More people can be helped by providing honest, no-bullshit content
There are a greater number of opportunities to build a career in the blockchain space
With these advantages in mind, the decision to focus heavily on creating video-based content was an easy one.
Are forks an easy form of market manipulation and are we about to head into a period of forks designed to manipulate and detract from the overarching purpose of Cryptocurrencies? These questions and more will be answered in today’s article – keep reading.
Let us start by saying that the Segwit2x hard fork was the biggest threat to Bitcoin in its existence so far and the resulting cancellation has arguably solidified the idea that the original Bitcoin chain will never be dethroned as the true Bitcoin.
Some may dispute this and say that the failed fork has highlighted the issues with Bitcoin and could have paved the way for Bitcoin Cash to become the real Bitcoin. It’s an interesting debate and one we will be talking about very soon.
The problem is that we believe we could be in era of many hard forks to come due to the principle set by the recent forks.
IMPORTANT POINT: Hard forks are a natural part of Cryptocurrencies and they usually occur because of genuine differing opinions within a community such as Bitcoin Cash. These types of hard forks are good and allow each part of the community to attempt their own solutions as they should rightly be allowed. This article addresses the issue that comes with scammy looking hard forks used as a method of attempting to manipulate the market.
Bitcoin Gold & Free Coins
Bitcoin Gold never threatened to be the true Bitcoin. However, it did promise people ‘free’ coins just by holding Bitcoin which, in turn, artificially pumped the price of Bitcoin. This is despite the fact that Bitcoin Gold was a pre-mined piece of garbage with very little going for it
Essentially, a group of people spotted an issue with Bitcoin – miner centralisation – claimed that they would fix it and launched a hard fork despite having done no real work.
Yet the price of Bitcoin Gold rose to over $500 at one time, giving it a market cap above $8 billion. When you consider that there are many altcoins with strong projects and real teams working hard and they have virtually no chance to reach such a high valuation as this shitcoin, it makes us feel a little sick.
To a scammer out there though, this presents opportunity. If you were a scammer, ask yourself the following question:
Would you rather:
Launch a scam ICO – Attempt to compete with hundreds of other ICOs each month and the best case scenario is probably a $10 million raise
Create a new hard fork of Bitcoin – Zero competition and the best case scenario is up to $6 billion (BTG pre-mined 1 million coins with Bitcoin around $6,000)
If you created the fork, you could pre-mine it and make yourself rich. However, Bitcoin Gold did receive a decent amount of bad press so this might not be possible with future forks.
What If You Can’t Pre-Mine?
Even if you don’t pre-mine it though, we’ve seen that a fork of Bitcoin creates a clear pattern in market movements – Bitcoin rises pre-fork and then altcoins shoot up soon after.
Therefore, what is stopping someone with decent reach within the Bitcoin community from buy leveraged Bitcoin one day and then announcing their fork the following day? Bitcoin would shoot up and they could sell for massive profits.
As we get nearer to the day of the fork, they could buy lots of altcoins and announce that the fork has been cancelled a few hours later. Looking back at the last fork, we saw a massive spike in altcoins as soon as the cancellation was announced.
The pattern of which coins will spike is very easy to call. The difficulty is the timing; if you’re the one who can cancel the fork at any time, you control the timing.
Did This Happen With Segwit2x?
We’re not suggesting that Segwit2x was an elaborate plan concocted to manipulate the market. However, you have to ask the following question:
Do you think the people who cancelled the fork bought the alts before they made the announcement?
We certainly do. In any other market, that would be considered insider trading; not Crypto-land.
It’s for this reason above that we am concerned this might not be the end of hard forks on the Bitcoin network – by this we’re referring to scam hard forks not legitimate ones with the intention of improving Bitcoin.
So, how do we stop this from happening? We’ll explain below.
2. How Do We Stop Scam Hard Forks?
It’s impossible to stop somebody from forking Bitcoin and producing an extra coin. On top of this, when forks are used correctly, they aren’t even a bad thing e.g. Bitcoin Cash.
However, if you can take away the effects that it has on the market, there would be no incentive for the situation to occur.
What do we mean by this?
Hard forks could be used my market manipulators as a means of making money BECAUSE the market moves in a somewhat obvious pattern when a fork occurs:
Bitcoin rises pre-fork as everybody wants ‘free coins’
Altcoins rise post-fork as they regain their previous prices
But what if people stopped receiving a ‘free’ coin?
Suddenly, the market wouldn’t move as we’ve just discussed because there would be no incentive for people to buy Bitcoin pre-fork.
You’re probably thinking:
‘But you said we couldn’t stop a fork from producing a free coin?’
No, we said an ‘extra’ coin and it’s this differentiation which is incredibly important – forked coins are not free at all.
We’ll continue discussing how to stop scam hard forks in just a second. First, we must understand that forked coins are not free at all – after all, it’s this knowledge which is how we stop them!
SORRY TO INTERRUPT…
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Anyway, let’s get back to the content!
3. Are Forked Coins Really Free?
The entire idea of a forked coin being free makes no sense – it would mean producing money out of thin air.
If a forked created a free coin worth money, why wouldn’t we fork Bitcoin every week and sit back as we all get rich?
Because it’s impossible to create extra free money.
You’re probably thinking:
‘So, where does the value of the forked coin come from?’
It comes from the value of the original coin – Bitcoin in this instance. Let’s say Bitcoin is worth $7,000 before and someone creates a forked coin worth $1,000. The value of Bitcoin should now be $6,000.
We had actually had evidence to back this up but the market was removed soon after the Segwit2x was cancelled:
Before it was cancelled, you could buy Bitcoin futures and B2X futures on Bitfinex. They represented the price of Bitcoin after the fork and the new B2X coins after the fork.
Funnily enough, if you added the two of them up they came to within $5 of the actual value of Bitcoin at the time (pre-fork). This is because the traders smart enough to understand this market also understood that the value of the B2X coin comes from Bitcoin and thus should causes Bitcoin to fall in value post-fork.
Now that we’ve understood this, we can get back to how to stop scam hard forks and the answer is…
Bitcoin only pumps pre-fork because everyone believes that they’re getting a free coin. If people began understanding that they weren’t getting a free coin, suddenly there would be no reason for people to buy Bitcoin.
Without this, the incredibly obvious market pattern we’ve seen before and after forks would no longer occur. If this pattern was removed, the people behind the fork would no longer be able to make a lot of money by timing the market correctly.
In other words, if forks no longer had an impact on the market, people couldn’t be used to manipulate the markets.
Logically, Bitcoin forks shouldn’t impact the market. So why does it?
Let’s jump into that below because, at this point, you may be thinking:
‘This guy has no idea what he’s talking about. Bitcoin Cash gave us free coins and it didn’t come from the value of Bitcoin’
Well, we’ll explain that point below too:
4. Bitcoin Cash Gave Us Free Coins, Right?
In the lead up to Bitcoin Cash, everybody believed that they were getting free coins by holding Bitcoin so the price of Bitcoin pumped.
Once the fork occurred, the price of Bitcoin remained relatively constant while the new ‘free’ Bitcoin Cash also added a decent price to Bitcoin holders.
So why did this occur?
It’s a self-fulfilling prophecy – because everyone believed that they were getting a free coin which didn’t come from the value of Bitcoin, people continued trading Bitcoin at the same price.
What Determines Price?
The price of Bitcoin, Bitcoin Cash and all things is based on the market price which is determined by us. If everyone believes that value of Bitcoin Cash didn’t come from Bitcoin, there is no reason in their minds for the price of Bitcoin to fall so they continue buying and selling at the same price.
Let’s look at a hypothetical situation whereby people were expecting the price of Bitcoin to fall after the Bitcoin Cash (BCH) fork because they understood that BCH’s value came from Bitcoin:
In this scenario, the entire market would be expecting Bitcoin to fall in price so more people would sell BTC more than buy it. This would cause the Bitcoin price to fall.
All of these situations occur based on what the entire collective of people buying and selling think will happen:
If you believe Bitcoin is rightly about to dip in price, you will sell. As will many other people and this will cause the dip.
If you believe Bitcoin won’t dip, you won’t sell. As won’t many other people and thus the dip won’t occur
As the majority of people didn’t think that BTC should dip – due to not understanding that it should, in theory – this caused the price of Bitcoin to remain steady.
We hope this clarifies a few things for you guys and we truly hope that we can avoid these market manipulation forks from happening.
Another interesting thought to highlight is the following:
As the market matures and people begin realising that forks don’t produce free coins, do you think the market will stop pumping Bitcoin before the fork?
If this were to happen, we wouldn’t have anything to worry about in terms of scam forks. However, we don’t think that the market will mature in this sense any time soon and this pattern could continue, leading to many more forks.
If you want to help stop the scam forks, please teach a few other people that they aren’t getting free coins in a fork!
That’s the end of the article! Thanks for stopping by and don’t forget to check out ourother articles for regular Crypto/ICO reviews and market updates.