Long Bitcoin and Short Bitcoin Cash to Benefit From Mt. Gox Repayments: Trader

As a researcher with experience in cryptocurrency markets, I find Presto Labs’ market-neutral strategy to profit from Mt. Gox repayments intriguing. The dynamics of supply and demand for Bitcoin (BTC) and Bitcoin Cash (BCH), resulting from the distribution of assets worth billions of dollars, create an interesting pair trading opportunity.A Singaporean trading company, Presto Labs, is proposing to its clients an investment strategy involving Bitcoin (BTC) and Bitcoin Cash (BCH) for a market-neutral transaction. This move aims to capitalize on the ongoing Mt. Gox compensation payments by wagering on Bitcoin’s strength while concurrently opposing Bitcoin Cash.

Last week, approximately hundreds of millions of dollars’ worth of Bitcoin (BTC) were released into the market as part of Mt. Gox’s long-planned compensation to victims of its 2014 hack. In contrast, over $73 million of Bitcoin Cash (BCH) will be distributed to traders in the near future, which is a significantly smaller amount compared to the $9 billion worth of BTC.

As a market analyst at Presto, I and my team led by Peter Chung have identified an significant event in the cryptocurrency market: Mt. Gox’s Rehabilitation Trustee intends to distribute vast amounts of Bitcoin (BTC) and Bitcoin Cash (BCH) between July 1st and October 31st, 2024. This distribution could significantly impact the supply and demand dynamics for both cryptocurrencies during this four-month period. As a result, we believe that pair trading opportunities may emerge in BTC and BCH markets.

“According to our findings, the demand to sell Bitcoin Cash (BCH) is expected to be four times greater than that of Bitcoin (BTC). Specifically, approximately 24% of BCH’s daily trading value will be used for selling compared to only 6% for Bitcoin. To implement this market-neutral position without accounting for funding rate risks, consider long positions in Bitcoin perpetuals and short positions in Bitcoin Cash perpetuals.”

As an analyst, I’d put it this way: In the last 24 hours, approximately $27 billion in Bitcoin (BTC) transactions have taken place based on CoinGecko data. On the other hand, only about $180 million worth of Bitcoin Cash (BCH) exchanges were recorded during the same timeframe.

Presto noted that the relatively weak investor base of BCH might sell their entire holdings in the short term, amounting to a complete liquidation.