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Can Cryptocurrencies Split Like Stocks? The Answer Might Surprise You

Source The Motley Fool

Now that Bitcoin (CRYPTO: BTC) has crossed the $100,000 mark, some investors are asking whether the world's most popular cryptocurrency might split. After all, popular tech stocks split all the time, primarily to keep their prices attractive to the average investor.

Granted, Bitcoin at a price of $100,000 does induce a fair amount of sticker shock. But is a split of Bitcoin even possible? And if it is possible, would you really want one to take place?

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Stock splits vs. crypto splits

Generally speaking, stock splits take place when the price of a stock is deemed to be too expensive for the average investor. In a stock split, there is no change to the overall market cap of the stock. In a 2-for-1 stock split, for example, the number of shares doubles, but the price of each share is cut in half. Thus, if you held 500 shares of a company valued at $2 each, you now have 1,000 shares of that company valued at $1 each.

Crypto splits, for the most part, are not necessary. A single Bitcoin, for example, can be divided into 100 million units, called satoshis. So, even though the price of Bitcoin might be $100,000, investors are under no obligation to spend $100,000 to buy a full Bitcoin.

On some cryptocurrency exchanges, you can buy as little as $1 worth of Bitcoin if you so choose. For example, if you invested $1,000 in Bitcoin when the crypto trades at $100,000, your account would simply show that you own .01 Bitcoin (i.e., 1/100th of a Bitcoin).

Image source: Getty Images.

Theoretically, a split of Bitcoin could occur. But it would require a change to the underlying Bitcoin source code, and would be nearly impossible to carry out since it would require the consensus of the entire Bitcoin community.

And achieving that level of consensus would be problematic because Bitcoin is a completely decentralized digital asset. There is no chief executive officer, no board of directors, and no corporate headquarters. In fact, we don't even really know who created Bitcoin. (All we have is a pseudonym: Satoshi Nakamoto.)

Thus, a Bitcoin split -- in the manner of a stock split -- is unlikely because it's probably impossible to get a majority of the global Bitcoin community to agree on a change to the underlying code.

Hard forks

That being said, cryptocurrencies do undergo certain changes -- called hard forks -- that can loosely be called splits because they do result in a splitting of the blockchain. These forks occur when members of the developer community are unhappy with the way a cryptocurrency is progressing, and put together proposals to improve the underlying blockchain code.

When those proposals gain enough momentum, they can result in a hard fork of the blockchain. At that time, the main blockchain is split into two blockchains, and a new token is created for the newly created blockchain. From then on, there are two blockchains and two tokens (one for each blockchain).

And, indeed, there have been nearly 100 forks of Bitcoin since its launch back in 2009. Most of these occurred in the early years of Bitcoin, and resulted in minor changes designed to improve a technical aspect of Bitcoin, such as how much data can be contained within a single block of the Bitcoin blockchain.

That's why, for example, we have Bitcoin Cash (CRYPTO: BCH), which ranks as the 21st most valuable cryptocurrency, with a market cap of about $8.7 billion (versus Bitcoin's $2.1 trillion). However, of the 100 or so Bitcoin forks, many are now inactive or defunct. Investors overwhelmingly prefer the original Bitcoin.

Halvings

In 2024, there was quite a bit of confusion over the Bitcoin halving. From the name, it sounded like Bitcoin itself was somehow being halved, and some media outlets mistakenly described this as a Bitcoin split. In the minds of some investors, this must have sounded like a 2-for-1 split.

But the Bitcoin halving describes what happens to the rewards paid to Bitcoin miners. The size of the Bitcoin reward paid to miners gets cut in half every four years. This has the practical affect of slowing the rate of new Bitcoin creation. All of this is determined by the Bitcoin algorithm, and there's no way any corporation or government entity can change it.

That's what makes Bitcoin so attractive to many investors: We know exactly what the Bitcoin supply is, how much will be produced each year, and what the overall lifetime supply of Bitcoin will be. The maximum lifetime supply of Bitcoin is carved into stone at 21 million coins.

Bitcoin's fixed lifetime supply

At the end of 2024, BlackRock (NYSE: BLK) released a three-minute Bitcoin explainer video. The video circulated all over social media, and went viral for one simple reason: It hinted that the maximum lifetime supply of Bitcoin might need to change in the future.

BlackRock was likely suggesting that the demand for Bitcoin is so high, and the supply so limited, that it might make sense to increase the coin supply to bring in new investors.

As might be expected, even a hint about a change to the Bitcoin supply created an absolute uproar in the crypto community. It's impossible to fully convey how important the 21 million ceiling is for Bitcoin. Changing this rule, in the minds of many Bitcoin purists, would fundamentally change the idea of Bitcoin being a digital currency impervious to the influence of outside forces.

Thus, it's unlikely that Bitcoin will ever split. There may be hard forks of Bitcoin in the future. And there will continue to be Bitcoin halvings every four years until the year 2140. But a change in the total lifetime Bitcoin coin supply is surely out of the question.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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