Blockchain
Bitcoin (BTC) Long, Bitcoin Cash (BCH) Short to Benefit from Mt. Gox Refunds: Trader
Singapore-based trading firm Presto Labs suggests clients bet on Bitcoin (BTC) strength and against bitcoin cash (BCH) in a market-neutral trade to profit from the ongoing Mt. Gox redemptions.
Hundreds of millions of BTC hit the market last week, as the Mt. Gox exchange finally began long-awaited refunds to creditors affected by the 2014 hack. Over $73 million in BCH is set to be distributed to traders in the coming months, compared to $9 billion in BTC.
“The Mt. Gox Rehabilitation Trustee plans to distribute billions of dollars’ worth of BTC and BCH between July 1 and October 31, 2024,” Presto market analysts led by Peter Chung told CoinDesk in a note on Wednesday. “This may create a shift in the supply/demand dynamics of BTC and BCH during this 4-month period, potentially opening up a pairs trading opportunity.
Pair trading is a trading strategy that involves the simultaneous purchase and sale of two financial assets to profit from relative changes in their prices.
“Our analysis shows that selling pressure for BCH will be four times greater than that for BTC, or 24% of the daily trading value for BCH versus 6% of the daily trading value for BTC. BTC perpetual longs paired with BCH perpetual shorts are the most efficient and market-neutral way to express this view, excluding funding rate risk,” Chung added.
CoinGecko data shows that over $27 billion worth of BTC has been traded in the last 24 hours, compared to $180 million worth of BCH.
He also assumes that investors who owned bitcoin in its early stages are likely to be “rich, diamond-handed Bitcoiners” and thus more likely to hold on to some of their redemptions rather than sell the asset outright.
However, “100% will be BCH’s “much weaker investor base” that could see 100% sold in the near term,” Presto said.