[baobabKoodaa]

A dividend is not "new value" or "unrelated to your ownership stake". If you hold stock worth $100 and you get a $2 dividend, value of the stock drops to $98. Just like a stock split, or a cryptocurrency hard fork: before the event you had some assets worth $100 and after the event you have some assets worth $100. (Plus some -- mostly random -- fluctuation in asset prices.)

[arcticbull]

You are correct it’s not new value per se, I was sort of glossing over that.

A dividend is in fact unrelated to your ownership stake. Before a dividend and after a dividend, you continue to own the same percentage of the underlying entity. You could use the dividend to in fact increase your beneficial ownership stake by re-investing it in the security. What has changed is the market value of your shares -- and to your point, by the dividend amount.

With a crypto fork, what's happening is someone is creating a new asset out of thin air, by copying an existing chain. When that happens, you now have two "assets" X and Y. The value may not even be correlated in any way. If I forked the BTC chain to create MagicPonziCoin2, it's not going to change the value of BTC whatsoever. This is recording that there's some initial value to the post-fork coin. If the fork affects the original holding, you can recognize your gain or losses by selling. If the post-fork coin changes in value, you can recognize your gain or loss there by selling relative to the value at your acquisition.

[pliao39]

Hoping on the analogy train (knowing full well that all our analogies will be somewhat imperfect because this tech is unprecedented). I don't think it's like a stock split or a dividend.

I think a hard fork is most like a company breaking itself apart (like eBay/PayPal into, well, eBay and PayPal). In the case of eBay/PayPal, each holder of the eBay stock also got PayPal stock 1:1, just like in a hard fork.

I did some quick research into this and found that the issuance of PayPal stock was NOT a taxable event: https://www.sec.gov/Archives/edgar/data/1633917/000119312515...

The relevant quote: "The separation will provide current eBay stockholders with equity ownership in both eBay and PayPal. We expect that the distribution of PayPal common stock will be tax-free, for U.S. federal income tax purposes, to eBay stockholders."

The reason this is similar to a hard fork is that, in theory, the two chains will splinter their hash power, their usage, and at the time, no REAL value is being transferred/created because of the fork (in theory).

There is, of course, the abstract concept that I'm calling "anti-synergy": when two groups are suffering being together and there is more global value in the world when they're apart.

[baobabKoodaa]

Hard forks can not magically create money out of thin air. If the "new" chain has some value post-fork, that value has been siphoned off the "old" chain (technically neither is "new" or "old" relative to each other, but bear with me for a minute).

Suppose the opposite was true. If you could create value out of thin air like that, we could all get rich just by forking cryptos over and over again. I know it _seems like_ this has been happening in past 2 years. It's an example of irrational market behavior. There is no* reason hard fork should create value.

*Sibling comment is also correct. A hard fork may create value by separating two entities which can thrive separately better than they can together. Similar to how a company that is shelling out dividends may be more valuable than a company which hoards cash.

However, in a rational market this information would be incorporated into prices _before_ the hard fork: there is still no rational reason for the total price of assets to magically jump after the event.

[belltaco]

>If the "new" chain has some value post-fork, that value has been siphoned off the "old" chain

Not necessarily. I don't see how that follows at all.

>Suppose the opposite was true. If you could create value out of thin air like that, we could all get rich just by forking cryptos over and over again. I know it _seems like_ this has been happening in past 2 years. It's an example of irrational market behavior. There is no* reason hard fork should create value.

How does that matter to the IRS whether market is being irrational or rational?

>However, in a rational market this information would be incorporated into prices _before_ the hard fork: there is still no rational reason for the total price of assets to magically jump after the event.

The crypto market is full of hype and irrational actors

[baobabKoodaa]

> >If the "new" chain has some value post-fork, that value has been siphoned off the "old" chain

> Not necessarily. I don't see how that follows at all.

If you can make infinite money out of thin air by making infinite hard forks, go ahead. No-one's stopping you.

> >Suppose the opposite was true. If you could create value out of thin air like that, we could all get rich just by forking cryptos over and over again. I know it _seems like_ this has been happening in past 2 years. It's an example of irrational market behavior. There is no* reason hard fork should create value.

> How does that matter to the IRS whether market is being irrational or rational?

I didn't say it matters to the IRS.

> >However, in a rational market this information would be incorporated into prices _before_ the hard fork: there is still no rational reason for the total price of assets to magically jump after the event.

> The crypto market is full of hype and irrational actors

We are in agreement here.

[smallnamespace]

Here's a reason: the market was unsure whether the fork would happen until the moment of voting.

Let's say the chain is worth $100 unforked and the value of forking is $10. The value might be $105 if the market only thinks forking is 50% likely, and can remain uncertain depending on how much voting information leaks out. If the fork succeeds, value jumps to $110.

I'm not making this up out of whole cloth either, merger arbitrage funds make a living on these price jumps in equities.

As a meta comment, it's probably unwise to make such sweeping negative claims in a field as varied and immature as economics/finance. You'll always find broad exceptions, since the definitions are all made up by humans out of convenience.

[baobabKoodaa]

Ah, you're right. The uncertainty surrounding a hard fork can be a rational reason for a price jump after a successful fork.