According to Presto Labs’ head of research, concerns that the Mt. Gox bankruptcy repayment will cause a Bitcoin (BTC) price drop are largely unfounded. However, the scenario for Bitcoin Cash could be more bearish.
Market Impact Analysis
CoinDesk reports that more than $200 million in liquidations have already taken place on the market as the trading day begins in Asia on Thursday, as the Bitcoin price continues to fall below $60,000. The former exchange, Mt. Gox, will return about $9.5 billion worth of BTC to its customers. It will also distribute 143,000 BCH, worth about $73 million. With Bitcoin Cash’s daily volume at $308.8 million, according to CoinGecko data, these redemptions would account for about 24% of daily volume.
Peter Chung of Presto Labs noted, “Our analysis suggests that BCH’s selling pressure is four times greater than BTC’s, at 24% of BCH’s daily trading value, compared to 6% of BTC’s daily trading value.” Chung noted that BCH’s daily trading value is only 1/50th of BTC’s.
Selling pressure on Bitcoin Cash
In an interview with CoinDesk, Chung explained that Bitcoin is expected to experience limited selling, as those seeking to exit have already sold their claims in the bankruptcy claims market. “We can safely assume that the current group of creditors consists of BTC bulls with the Diamond Hand, as weaker creditors have had plenty of opportunities to exit over the past decade thanks to aggressive bids from the claims fund,” Chung said.
Chung suggests that creditors are likely to treat BCH as an “airdrop” and sell it off immediately, as the Bitcoin Cash fork occurred three years after the Mt. Gox collapse. “The creditors don’t know what caused BCH,” he added.
Trading Strategy
Chung recommended a market-neutral trading strategy to deal with this situation. “Except for funding ratio risk, the most efficient way to express this view is to pair long BTC perpetual bonds with short BCH perpetual bonds,” he said. He added that those seeking to secure funding ratios could look to other approaches, such as borrowing BCH on short-term futures or the spot market.
Current Market Performance
According to CoinDesk Indices data, BCH is currently trading at $360, down 3.8%. The impending Mt. Gox buyback and potential selling pressure are the main factors influencing the current performance.
conclusion
While the Mt. Gox buyback is not expected to have a significant impact on Bitcoin, Bitcoin Cash could face significant selling pressure. This discrepancy is due to the relative impact of the buyback on BCH’s trading volume compared to BTC. Traders are advised to consider market-neutral strategies to navigate this volatile period.
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