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bitcoin fork


IanP

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How will the upcoming hard fork be treated for IG spread bet purposes?  I know there will probably be some market turmoil and, possibly, demand for the old/new bitcoins will signal an eventual "winner" which will impact pricing, but for those with positions in BTC now what exactly will happen?  I understand actual owners of bitcoin will automatically receive new currency.

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Put simply if you had £1/pt long on bitcoin going into the fork, you would have £1 long on both chains after the fork. Similarly, if you have £1 short on bitcoin, you'd have a new position booked short from zero on the new chain. 

 

Examples

 

What does this mean for your positions?
If you hold an open position on bitcoin at the time of the fork and the hard fork does go ahead, we will make a cash adjustment to your account, or book a new position in bitcoin gold with an opening price of zero. We may initially value your positions at 0, but once there’s a value on major exchanges, this will be reflected in those positions. Clients with short positions risk having a running loss on their new bitcoin position.
Short Position Long Position
If the fork goes ahead and you’re holding a short bitcoin position – say 3 contracts (or $300 per point) – when it does, we will book a new short position to your account for 3 contracts (or $300 per point) of the new bitcoin coin at a price of 0. 

If, for example, the new bitcoin is valued at $2 per coin, you will have a running loss on the position of $600. 

Alternatively, we will debit your account with $600 to reflect the loss you would realise.
If the fork goes ahead and you’re holding a long bitcoin position – say 1 contract (or $100 per point) – when it does, we will book a new long position to your account for 1 contract (or $100 per point) of the new bitcoin coin at a price of 0. 

If, for example, if the new coin is valued at $2 per coin, you will have a running profit on the position of $200. 

Alternatively we will credit your account with $200 to reflect the profit you would receive.

 

IG policy on blockchain forks

We base the price of our cryptocurrency products on the underlying market, made available to us by the exchanges and market-makers with which we trade.

 

There is currently one accepted decentralised ledger which records all bitcoin transactions – as well as an equivalent for ether – called the blockchain. When the software of different miners becomes misaligned, a split – or 'fork' – in the blockchain may occur. This results in the existence of two different blockchains. 

 

Generally, cryptocurrency users quickly agree which version to continue to use, causing minimal disruption. The old version of the blockchain is then discontinued.

 

In the event that one version isn't discontinued – known as a hard fork – we will generally follow the blockchain that has the majority consensus of cryptocurrency users, and will therefore use this as the basis for our prices. We reserve the right to determine which blockchain and cryptocurrency unit have the majority consensus behind them. 

 

If the hard fork results in a viable second cryptocurrency, we may create an equivalent position on client accounts to reflect this. However this action is at our absolute discretion, and we will have no obligation to do so. If, and when, the second cryptocurrency is tradeable on a major exchange, we will endeavour to represent that value. We’ll do this either by making the product available to close based on the valuation on that venue, or by booking a cash adjustment on client accounts.  If, within a reasonable timeframe, the second currency does not become tradeable on major exchanges or is otherwise deemed not to be viable as a currency (for example, it is not mined), we may delete any positions that had previously been created at no value on client accounts. We will take steps to notify you when we have taken this action.

 

When a hard fork occurs, there may be substantial price volatility around the event, and we may suspend trading throughout if we do not have reliable prices from the underlying market.

 

We will endeavour to notify you of potential blockchain forks, however it is your responsibility to make yourself aware of the forks that could occur.

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Further to this please see the below for a synopsis of email coms we will be sending out today. Please check your emails for more info. 

 

Bitcoin’s situation explained


There have been two hard forks in the bitcoin blockchain so far this year, and there are now proposals for another one. This next fork could lead to the creation of another new blockchain and cryptocurrency: bitcoin2x (B2x). Bitcoin2x will activate the second part of the ‘Segregated Witness’ protocol which will result in an increase in the block size from 1MB to 2MB.

 

Bitcoin2x aims to supersede bitcoin. At the moment, however, there isn’t a sufficient consensus within the bitcoin community to identify a clear winner in the SegWit2x hard fork. The possibility therefore remains that both blockchains and currencies will coexist, or that bitcoin2x will be accepted by the majority and renamed ‘bitcoin’.

 

The fork will take place once block #494,784 is mined, predicted to be on 16 November. This is, however, subject to change, and there is a possibility the fork may occur sooner, be delayed or not occur at all.

 

We would like to make you aware that all trading on bitcoin will likely be suspended for a significant period before and after the fork. We will also stop accepting client orders to open new short positions from 8 November until after the fork.

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In case anyone is wondering about the spike earlier, the Segwit2x fork has been suspended. Good decision IMO as a key principle of BitCoin is that its software moves forward on a consensus basis. However, sooner rather than later, they will need to address the transaction volumes issues. Segregated witness will help, but it's not clear to me if it will be enough.

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