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?
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).
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.
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.
