Mt. Gox, the former cryptocurrency exchange that went bankrupt, is set to return $73 million worth of Bitcoin Cash (BCH) to its former customers. This amount represents more than 20% of BCH’s daily trading volume, according to a report by Peter Chung, the Head of Research at Presto Labs.
Contrary to popular belief, Chung argues that the redemption of BCH by Mt. Gox is likely to have a bearish effect on Bitcoin Cash rather than Bitcoin (BTC). As Bitcoin’s price continues to drop below $60,000, concerns have been raised about the impact of the bankruptcy redemptions on the overall market.
In comparison to the $9.5 billion worth of BTC being returned to customers, the 143,000 BCH being sent back is worth approximately $73 million. This significant amount represents around 24% of Bitcoin Cash’s daily trading volume of $308.8 million.
Chung’s analysis suggests that the selling pressure for BCH will be four times greater than that for BTC, with 24% of BCH’s daily trading value being affected compared to only 6% for BTC. He explains that BCH holders are more likely to sell their tokens immediately, viewing them as an airdrop rather than a long-term investment.
Chung also highlights the difference in timelines between Mt. Gox’s bankruptcy and the creation of Bitcoin Cash through a fork. He believes that creditors are not as attached to BCH as they are to BTC, leading to a higher likelihood of selling off the tokens.
To take advantage of this market dynamic, Chung recommends a long position in BTC perpetuals paired with a short position in BCH perpetuals as a neutral strategy. This approach allows traders to profit from the expected price discrepancy between the two cryptocurrencies.
As of now, Bitcoin Cash is trading at $360, reflecting a 3.8% decrease in value. Despite the current market conditions, Chung’s analysis provides valuable insights for traders looking to navigate the impact of Mt. Gox’s bankruptcy redemptions on the cryptocurrency market.