Mt. Gox’s upcoming bankruptcy redemptions have sparked concerns in the crypto world. Many fear these payouts will drive down Bitcoin’s price.
However, an analyst suggests that Bitcoin Cash (BCH) might face more pressure, saying that fears about the potential impact on BTC prices are unfounded.
Head of Research at Presto Labs, Peter Chung explains why BCH could see a significant sell-off following the proposed bankruptcy redemptions. Meanwhile, these remarks come as Bitcoin’s price dips below $60,000, with liquidations over $200 million as the Thursday Asian trading day began.
Mt. Gox Redemptions and Market Impact
Mt. Gox will return $9.5 billion in BTC and 143,000 BCH worth approximately $73 million to its former customers. This BCH payout represents about 24% of Bitcoin Cash’s daily trading volume. In contrast, the BTC payout is only 6% of Bitcoin’s daily volume.
Chung believes the selling pressure on BCH will be four times larger than that on BTC based on the difference in daily trading values between the two cryptocurrencies.
“Our analysis shows that the selling pressure for BCH will be four times larger than for BTC: 24% of the daily trading value for BCH vs. 6% of the daily trading value for BTC,” Peter Chung’s letter reads.
Many Mt. Gox creditors may view BCH as an unexpected bonus and might sell it quickly, as Bitcoin Cash forked after Mt. Gox’s bankruptcy.
Bitcoin’s Resilience
Furthermore, Chung argues that Bitcoin won’t face significant selling pressure, noting that weak-handed creditors likely sold their claims years ago. The remaining creditors are probably long-term Bitcoin believers who held on for a decade, showing their commitment to the asset.
This opinion likely filtered out those who would sell immediately upon receiving their Bitcoin.
“So we can safely assume the current group of creditors consists of diamond-handed BTC bulls,” says Chung.
Mt. Gox Fallout: Trading Strategies for Bitcoin and Bitcoin Cash
Chung suggests a market-neutral approach for traders looking to capitalize on this situation. He recommends going long on BTC perpetuals while shorting BCH perpetuals.
However, this strategy carries funding rate risks, so traders should be aware of these potential costs. Chung advised investors looking to lock in funding rates to explore other more efficient approaches. He said borrowing Bitcoin Cash in the spot market or shorting term futures could help lock in favorable funding rates.
Broader Market Context
This analysis comes as Bitcoin’s price experiences volatility, dipping below $60,000, triggering significant liquidations. As of 06:42 AM EST, Bitcoin is trading at $57,761, representing a 24-hour drop of 4.55%.
Following this price dip, over $200 million in positions were liquidated as trading began in Asia on Thursday.
Meanwhile, Bitcoin Cash (BCH) is currently at $349, with a volume of almost $400 million. According to CoinMarketCap, BCH lost 7% of its value in the past 24 hours and 6.93% over the past week.
This shows the crypto market’s rapid reaction to news and speculations. There could be increased volatility in the coming weeks, especially in the BCH market. Remember, the crypto market remains unpredictable; even expert analysis can’t guarantee outcomes.
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
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