Mt. Gox’s bankruptcy redemptions are bearish for BCH, not BTC, writes Presto Labs’ Peter Chung.
Mt. Gox will send back to its former customers $73 million worth of BCH, worth over 20% of the token’s daily trading volume.
Fears that selling pressure from bankruptcy redemptions from the estate of Mt. Gox will drive down the price of bitcoin (BTC) is unfounded, but it could be a bearish scenario for Bitcoin Cash (BCH), Presto Labs’ Head of Research wrote in a note.
Bitcoin’s price continues to dip below $60,000, with over $200 million in liquidations as the trading day began in Asia Thursday, CoinDesk reported earlier.
In addition to the roughly $9.5 billion in BTC the former exchange will send back to its customers, Mt. Gox will also send back 143,000 BCH worth around $73 million. CoinGecko data shows that Bitcoin Cash has a daily trading volume of $308.8 million, making this redemption worth around 24% of that number.
“Our analysis shows that the selling pressure for BCH will be four times larger than for BTC: 24% of the daily trading value for BCH vs. 6% of the daily trading value for BTC,” Presto Labs’ Peter Chung wrote in a note, pointing out that BCH’s daily trading value is 1/50 of BTC.
In an interview with CoinDesk, Chung said BTC is projected to have limited selling because anyone who wanted out could have sold their claims on bankruptcy claim markets.
In the early days of FTX’s bankruptcy, many traders who were not optimistic about a quick bankruptcy redemption, did just that.
“Weak-handed creditors had plenty of chances to exit over the last ten years on the back of aggressive bidding from the claim funds, so we can safely assume the current group of creditors consists of diamond-handed BTC bulls,” Chung told CoinDesk in an interview.
Chung argues that traders are going to treat the BCH “as an airdrop” and sell it immediately because Bitcoin Cash’s fork occurred three years after Mt. Gox’s bankruptcy.
“Creditors are oblivious to BCH’s cause,” he continued.
Long BTC perpetuals paired with short BCH perpetuals is the most efficient market-neutral way to express this view, barring funding rate risk, Chung wrote in the note.
“Those looking to lock in a funding rate can explore other approaches, such as shorting term futures or borrowing BCH in the spot market,” he continued.
BCH is currently trading at $360, down 3.8%, according to CoinDesk Indices data.
