Bitcoin’s forks are a lucrative business.
According to CoinDesk’s State of Blockchain report, they generated $44 billion in the fourth quarter of 2017. That figure is 8 times more than the amount raised by initial coin offerings (ICOs), another popular method for raising funds for cryptocurrencies, which generated $5 billion cumulatively. The forks typically result in the creation of a new coin which raises money by getting itself listed on cryptocurrency exchanges.
The most prominent forks in 2017 resulted in the creation of Bitcoin Cash and Bitcoin Gold. As of this writing, bitcoin cash has a total valuation of $16.4 billion and is the world’s fourth most valuable cryptocurrency. Bitcoin gold is valued at $1.4 billion and is ranked 20th. Bitcoin is expected to undergo more than 50 forks this year, according to reports. (See also: Will Bitcoin Undergo 50 Forks In 2018?)
CoinDesk’s State of Blockchain report, which was released on February 7, covers the fourth quarter of 2017, quite possibly the most volatile and newsworthy time in recent cryptocurrency history. During this period, bitcoin’s price almost touched $20,000 and the valuation of cryptocurrency markets increased by 301% to $448.8 billion as news reports cataloged their potential and scandals.
Bitcoin futures were introduced at the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) even as governments around the world mulled placing regulation restrictions on crypto trading. The volatility and rise in these markets sparked fears of a bubble, whose bursting could trigger a collapse of financial markets. (See also: What Happens If The Price Of Bitcoin Crashes.)
The CoinDesk report surveyed 3,000 people who bought into the cryptocurrency mania and found that 81% did not take debt to finance their purchases. Fifty-two percent of those who did resort to credit paid it back. This should be good news for banks, which have recently imposed bans or are charging higher fees on purchases of cryptocurrencies. (See also: Credit Card Issuers Are Charging Fees For Buying Cryptocurrencies.)
The CoinDesk survey also found that mom-and-pop traders comprised a majority of cryptocurrency investors. Specifically, 89% of investors in crypto markets were unaccredited investors or investors with a net worth of less than $1 million or making less than $200,000 per month.
The report also makes note of transaction fees for five cryptocurrencies – Bitcoin, Ether, Ripple, Zcash, and Monero. While usage statistics for all five digital currencies surged during the last quarter of 2017, only bitcoin witnessed an increase in transaction fees. At a conference this week, Nolan Bauerle, research director at CoinDesk, said the rise in transaction fees reflected increased demand. (See also: Cryptocurrency Billionaire Rankings: The Richest People In Crypto.)
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin.