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.
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.
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.
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.
>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
> >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
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.
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.