Tech
Mt. Gox Crisis Likely to Impact Bitcoin Cash, Not Bitcoin: Analyst
The upcoming Mt. Gox bankruptcy ransoms have raised concerns in the cryptocurrency world. Many fear that these payments will drive down the price of Bitcoin.
However, one analyst believes that Bitcoin Cash (BCH) could come under more pressure, saying that fears about the potential impact on BTC prices are unfounded.
Presto Labs head of research Peter Chung explains why BCH could see a significant sell-off following proposed failed buybacks. Meanwhile, these observations come as Bitcoin price dips below $60,000, with liquidations exceeding $200 million early in the Asian trading day on Thursday.
Mt. Gox Redemptions and Market Impact
Mt. Gox will return $9.5 billion in BTC and 143,000 BCH worth about $73 million to its former customers. This BCH payment represents about 24% of the daily trading volume of Bitcoin Cash. In contrast, the BTC payment is only 6% of the daily volume of Bitcoin.
Beer you think Selling pressure on BCH will be four times greater than that on BTC based on the difference in daily trading values between the two cryptocurrencies.
“Our analysis shows that selling pressure for BCH will be four times greater than for BTC: 24% of daily trading value for BCH versus 6% of daily trading value for BTC,” Peter Chung’s letter reads.
Many Mt. Gox creditors may see BCH as an unexpected bonus and may quickly sell it, as Bitcoin Cash forked after the Mt. Gox failure.
The Resilience of Bitcoin
Furthermore, Chung argues that Bitcoin will not experience significant selling pressure, noting that weak creditors likely sold off their claims years ago. The remaining creditors are likely long-term Bitcoin supporters who have held out for a decade, demonstrating their commitment to the asset.
This opinion probably excluded those who would have sold immediately after receiving their Bitcoins.
“So we can safely assume that the current group of lenders are diamond-handed BTC bulls,” Chung says.
Mt. Gox Fallout: Trading Strategies for Bitcoin and Bitcoin Cash
Chung suggests a market-neutral approach for traders looking to capitalize on this situation. He recommends going long on BTC perpetual and short on BCH perpetual.
However, this strategy does come with funding rate risks, so traders should be aware of these potential costs. Chung advised investors looking to lock in funding rates to explore other, more efficient approaches. He said that borrowing Bitcoin Cash on the spot market or shorting futures could help lock in favorable funding rates.
Broader market context
This analysis comes as the price of Bitcoin experiences volatility, falling below $60,000, triggering significant liquidations. As of 06:42 AM EST, Bitcoin is trading at $57,761which represents a drop of 4.55% in 24 hours.
Following this drop in prices, over $200 million in the positions have been liquidated while trading began in Asia on Thursday.
Meanwhile, Bitcoin Cash (BCH) is currently at $349, with a volume of nearly $400 million. According to CoinMarketCapBCH has lost 7% of its value in the last 24 hours and 6.93% in the last week.
This shows the cryptocurrency market’s quick reaction to news and speculation. There may be more volatility in the coming weeks, especially in the BCH market. Remember, the cryptocurrency market remains unpredictable; even expert analysis cannot guarantee results.
Disclaimer: The views expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile and high-risk asset class.
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