Long Bitcoin and Short Bitcoin Cash to Benefit From Mt. Gox Repayments: Trader
Both assets are being distributed in an ongoing process to creditors of the defunct Mt. Gox crypto exchange. Here’s how some traders are playing it out.
Updated Jul 11, 2024, 6:31 a.m. Published Jul 11, 2024, 6:29 a.m.
- Presto says a market-neutral strategy to profit from the Mt. Gox repayments by betting on bitcoin strength and against bitcoin cash.
- The strategy stems from the supply/demand dynamics for BTC and BCH due to the distribution of assets worth billions of dollars.
Singapore-based trading firm Presto Labs is suggesting clients bet on bitcoin (BTC) strength and against bitcoin cash (BCH) in a market-neutral trade to profit from the ongoing Mt. Gox repayments.
Hundreds of millions worth of BTC hit the market last week as defunct exchange Mt. Gox finally began its long awaited repayments to creditors impacted in a 2014 hack. Over $73 million worth of BCH is set to be distributed to traders in the coming months, compared to $9 billion worth of BTC.
“The Mt. Gox’s Rehabilitation Trustee plans to distribute multi-billion dollars worth of BTCs and BCHs between July 1st and October 31st, 2024,” Presto market analysts led by Peter Chung told CoinDesk in a note Wednesday. “This can create a shift in supply/demand dynamics in BTC and BCH during this 4-month period, potentially opening up a pair trading opportunity.
Pair trading is a trading strategy that involves buying and selling two financial assets simultaneously to profit from their relative price movements.
“Our analysis shows that the selling pressure for BCH will be four times larger than for BTC - i.e. 24% of the daily trading value for BCH vs. 6% of the daily trading value for BTC. Long BTC perpetuals paired with short BCH perpetuals is the most efficient market-neutral way to express this view, barring funding rate risk,” Chung added.
CoinGecko data shows over $27 billion worth of BTC exchanged hands in the past 24 hours, compared to $180 million of BCH.
Presto further assumes that investors who held bitcoin at its earlier stages are likely to be “diamond-handed wealthy Bitcoiners,” and thus more likely to hold part of their repayments instead of selling the asset outright.
However, “100% will be the “much weaker investor base” of BCH could see 100% sold in the near term, Presto said.
Shaurya Malwa
Shaurya is the Co-Leader of the CoinDesk tokens and data team in Asia with a focus on crypto derivatives, DeFi, market microstructure, and protocol analysis. Shaurya holds over $1,000 in BTC, ETH, SOL, AVAX, SUSHI, CRV, NEAR, YFI, YFII, SHIB, DOGE, USDT, USDC, BNB, MANA, MLN, LINK, XMR, ALGO, VET, CAKE, AAVE, COMP, ROOK, TRX, SNX, RUNE, FTM, ZIL, KSM, ENJ, CKB, JOE, GHST, PERP, BTRFLY, OHM, BANANA, ROME, BURGER, SPIRIT, and ORCA. He provides over $1,000 to liquidity pools on Compound, Curve, SushiSwap, PancakeSwap, BurgerSwap, Orca, AnySwap, SpiritSwap, Rook Protocol, Yearn Finance, Synthetix, Harvest, Redacted Cartel, OlympusDAO, Rome, Trader Joe, and SUN.
