Presto Labs Market Analysis on Bitcoin and Bitcoin Cash
Singapore-based trading firm Presto Labs is advising its clients to consider a market-neutral trade strategy to capitalize on the ongoing Mt. Gox repayments. This strategy involves betting on the strength of bitcoin (BTC) while betting against bitcoin cash (BCH).
Last week, defunct exchange Mt. Gox initiated repayments to creditors affected by a 2014 hack, injecting hundreds of millions of dollars worth of BTC into the market. In contrast, over $73 million worth of BCH is scheduled to be distributed to traders in the upcoming months, a significantly smaller amount compared to the BTC repayments, which amount to $9 billion.
The Rehabilitation Trustee of Mt. Gox plans to distribute these assets between July 1st and October 31st, 2024. Presto’s market analysts, led by Peter Chung, believe that this distribution could impact the supply and demand dynamics of BTC and BCH during this period, presenting a potential pair trading opportunity.
Pair trading involves simultaneously buying and selling two financial assets to profit from their relative price movements. Presto’s analysis indicates that the selling pressure for BCH is expected to be four times larger than that for BTC, with 24% of the daily trading value for BCH and 6% for BTC. Thus, a suggested market-neutral trade would be to long BTC perpetuals while shorting BCH perpetuals.
According to CoinGecko data, the trading volume for BTC far exceeds that of BCH, with over $27 billion worth of BTC exchanged in the last 24 hours compared to $180 million of BCH.
Presto also considers the investor base for each cryptocurrency. They anticipate that early bitcoin holders, referred to as “diamond-handed wealthy Bitcoiners,” are more likely to retain a portion of their repayments rather than selling immediately. On the other hand, the investor base for BCH may be weaker, potentially leading to a higher percentage of BCH being sold in the short term.
By carefully analyzing these factors, Presto Labs aims to provide its clients with insights to navigate and potentially benefit from the evolving market conditions surrounding Mt. Gox repayments.