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

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.