What is a fork?
A fork, or in this case a hardfork, is the creation of a new coin from an existing one. In this example, Anonymous (ANON) is being created from Bitcoin (BTC) and ZClassic (ZCL). This being FinTech, it’s about technological advancement – adding features and functions not found in the parent coin/s. Unlike BTC and ZCL, ANON will be a PoW/PoS hybrid, making staking, in addition to mining, possible. Users will have the option to own and run masternodes and earn interest. According to KryptoCal, the code will be published on Github in about an hour.
A unique fork
This fork is unlike any other fork before it. Crypto project teams normally have to sign an NDA (non-disclosure agreement) by which they are legally bound not to reveal which exchanges will support the fork and list the newly created coin. This, in turn, makes participation in a fork a somewhat risky move for investors. With ANON, things are different. Supporting exchanges are to be announced almost a month before the snapshot/forking event.
What is a snapshot?
A snapshot is the moment the new coin is minted and an image of the coins gets registered as proof that the new coin has been created from the original one/s. The snapshot, therefore, precedes the fork by a short period of time, hours usually.
Fork trading strategy A
Some crypto traders view forks as high stakes gambles and have therefore developed investment strategies intended to control risk.
There are traders who accumulate the coin to be forked early and then also sell early. Usually this is done in increments as a means to obtain as many coins as possible for as little as possible and then sell them before the fork so as to take advantage of the FOMO hype and avoid exposing themselves to a potential pre-fork dump. Those traders pass on the opportunity of getting the newly minted coin at no cost. Their reasoning is based on the potential price volatility of the parent coin around the time of the fork (+/- a week or two) and the price volatility of the newly minted coin following its creation.
Initial valuation
The initial valuation, price stability and price appreciation of the new coin are largely dependent on when and where it gets listed, whether it is a part of a working product, and ease of use (wallet, integrations, partnerships, apps, plugins, etc.)
Supply and demand
Traders who sell the original coin before it forks frequently keep an eye on the newly minted coin and look for opportunities to purchase it a discount. They do this by placing very low limit buy orders, which, in turn, leads to price depreciation.
This is one example of how valuation is being ‘decided by the market’ with the ‘market’ being the buyers and sellers who agree on a price based on offers (buy and sell orders). If a large number of orders are in a certain price range and they get accepted by their counter parties, the price, at least for the moment, is set.
The market decides
Some describe this process as market manipulation while ignoring the fact that this is how the market works.
Let’s say you go to the farmers’ market to buy a pound of carrots and notice that your fellow shoppers refuse to pay $5 for a pound of carrots. The buyers’ offer is $2.50 and the seller’s offer is $5. Another seller comes in and offers a pound of carrots for $3.50 because he’s more eager to sell. Buyers go over and buy their carrots for $3.50, instead of $5. The market has decided. Certain buyers and sellers have agreed on the price of carrots while supply lasts – meaning, the price of $3.50 is not set in stone – it’s valid for the moment because both, the sellers and the buyers (i.e. the market), can change the price again.
Fork trading strategy B
Some crypto traders accumulate the coin to be forked and hold it through the snapshot only, in order to get the newly minted coin for free, just to sell it and make a profit. This is a riskier process and requires preparation. To pull this off you have to hold the coin to be forked in a private wallet and not on an exchange and your wallet has to be a 100% working wallet, free or glitches. You also have to have a reliable marketplace or an independent P2P (peer to peer) buyer ready, so as to execute the trade ASAP, because the more people do this, the more likely both coins dump, hard and fast. During the previous fork, ZCL dumped from $118 to $9 in 30 hours.
The ANON fork strategy
The Anonymous team decided to offer a transparently executed fork revealing all important information some time before the fork. Because ANON offers (at this time) cheap masternodes and is about to share exchange support pre-fork along with the code and a few other benefits, this fork may happen the way forks were meant to happen. Traders and investors accumulate a coin, hold the coin through the snapshot and the fork (and beyond) and get rewarded with free, freshly minted ANON coins and earn interest through staking by continuing to HODL.
What about ZClassic?
A new ZClassic team is scheduled to (finally) take over the ZClassic project around the 1st of September (9 days before the fork) and continue to develop it beyond its current state, something that is crucial to price stability and growth, both, in the short and the long term.
Price history
While at this moment ZCL’s weekly graph looks like a roller coaster, it is nothing compared to the section of the chart between December 2017 and March 2018. The price had gone from a couple of dollars to a couple of hundred and back. And while many hope that the current ZCL fork price will surpass ATH (all time high), that may not possible given the state of the crypto market.
Also, when there is a stratospheric and super fast price spike, a dump is guaranteed to follow. People make crazy gains and dump the coin to buy something else or to cash out.
If, on the other hand, gains remain modest, investors are more likely to hold and wait to see where the price of both coins is going.
In a successful fork, which is rare, the parent coin makes modest but lasting gains and that same value is attributed to the newly minted coin. If the newly minted coin comes with a feature not found in the original coin, the new coin may be valued even higher.
Once again, this is almost never the case. More often than not, the price of the newly minted coin is about 80-90% lower than the parent coin’s ATH (all time high), which is why many crypto traders hate forks.
Price to market ratio
Though unpredictable, forks make crypto more exciting and there are ways to, at least, gain an ounce of insight into the future so as to get an idea of what may happen in terms of pricing and potential gains, as well as the medium term potential of the endeavor.
Given that the crypto market is in a slump, market caps and prices are on the low side. Many a crypto lost most of the value it gained the previous year and, yet, traders remain uncertain as to whether we’ve reached rock bottom. Is now the time to buy the dip and is this the dip you should buy? To say that we’ve reached the stage of uncertainty would be an understatement.
And that is the primary reason why we should remain conservative when it comes to ZCL fork price expectations.
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