How to Evaluate a Fork

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Occasionally cryptocurrency developers decide to produce a fork of a particular blockchain, allowing for another separate coin to form from the same blockchain. These forks are uncommon, but to ignore them as a trader would be negligible because a handful of them become incredibly lucrative investments. For instance, Bitcoin Cash (perhaps the most famous fork to date) climbed to the price of $1000 relatively quickly, and it still has potential to rise further. The problem is that not every fork produces the same results. For instance, Bitcoin Platinum is mostly considered to be a scam with no significant value. Of course, other cryptocurrencies have new coins forming from forks too, such as MoneroV and Callisto (an upcoming Ethereum fork).

What is the view of the community?

What does the original coin’s community think of the fork? Gauging their excitement or disdain is an easy way to see how much public praise and adoption a coin will receive. For instance, people in the Bitcoin community seem excited about the recent Bitcoin Private fork. The appreciation of the public is necessary when getting a coin listed on popular exchanges. Sites like Binance, Bittrex, and KuCoin only list new coins if there is enough public interest in them.

Also, note that some forks will be popular enough to form their own entirely separate communities. For instance, when the Bitcoin Cash fork launched it ripped the Bitcoin community into two halves, with one supporting the coin and the other calling it a glorified scam. What the Bitcoin Cash fork taught us is that the cryptocurrency landscape is highly politicised, but not in the way you might think. Many people invest in and support particular coins for ideological reasons. Stellar often receive better press than Ripple because people deem Stellar to be more decentralized, for example. People in the Bitcoin community dislike Bitcoin Cash because it undermines the concept that Bitcoin is a fast and robust cryptocurrency. As a trader, you need to critically analyze the views of the public and try to predict what it will do to the coin’s price in the future.

What makes the fork unique?

Apart from sharing the same blockchain with a more established coin, what makes it an exciting investment? Does it have anything new or desirable to offer? As an example, Bitcoin Private provides private transactions while running on the Bitcoin blockchain. Go to the developer website and see what features they list for their fork. Forks don’t have whitepapers because, scientifically, they share most of the same attributes as their parent coin. Sometimes the only features a fork will add are that of higher security or possibly faster transactions. They can occasionally be enough to be a good investment.

What has the fork done to the price of its parent coin?

The run-up to the launching of a fork can have some impressive effects on its parent coin. For instance, when Bitcoin Cash was nearing launch, the price of Bitcoin began to rise significantly. It was the same when Bitcoin Gold was launching. This increase in price is due to many investors buying the parent coin and holding it in a wallet before the fork so that when it happens, they get a free amount of the fork’s coin too. The run-up to MoneroV’s launch also saw Monero’s price rise considerably, but it doesn’t happen with every coin. Bitcore (a Bitcoin fork) did very little to the price of its parent. When you notice an increase in the parent price, you can safely assume that people will be investing in the new fork. It doesn’t necessarily mean that the fork will grow in price, but it does mean that the fork is well known enough to cause such an action.

Kai is a cryptocurrency copywriter and professional trader. He can often be found investigating various cryptocurrencies, whitepapers, and blockchain technologies. Kai has been a professional writer for 5+ years, and has invested in 50+ different coins and tokens. He also currently studies Law and Philosophy at university.

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