Traders: How to Benefit from Mt. Gox Repayment Event Through Trading?

Author: Shaurya Malwa, CoinDesk; Compiler: Tao Zhu, Golden Finance

• Presto says market-neutral strategy to profit from Mt. Gox repayment by betting on bitcoin strength and shorting bitcoin cash.

• The strategy stems from the supply and demand dynamics of BTC and BCH due to the allocation of assets worth billions of dollars.

Singapore-based trading firm Presto Labs is advising clients to bet on bitcoin (BTC) strength and short bitcoin cash (BCH) in a market-neutral trade to profit from the ongoing Mt. Gox repayment.

Hundreds of millions of dollars worth of BTC hit the market last week as defunct exchange Mt. Gox finally began making long-awaited repayments to creditors affected by the 2014 hack. More than $73 million worth of BCH will be distributed to traders in the coming months, while BTC is valued at $9 billion.

“Mt. Gox’s repayment plan distributes billions of dollars worth of BTC and BCH between July 1 and October 31, 2024,” Presto market analyst Peter Chung said in a note on Wednesday. “This could lead to changes in the supply and demand dynamics of BTC and BCH during this four-month period, potentially opening up pairs trading opportunities.

Pairs trading is a trading strategy that involves buying and selling two financial assets simultaneously to profit from their relative price movements.

“Our analysis suggests that BCH will see four times more selling pressure than BTC — 24% of BCH’s daily trading volume and 6% of BTC’s daily trading volume.

“Our analysis suggests that BCH will see four times more selling pressure than BTC — 24% of BCH’s daily trading volume and 6% of BTC’s daily trading volume.

“ Long BTC perpetual contracts paired with short BCH perpetual contracts are the most effective market-neutral way to express this view, barring funding rate risk,” Chung added.

CoinGecko data shows that over $27 billion in BTC has traded in the past 24 hours, while BCH has traded $180 million.

Presto further hypothesizes that early investors who held Bitcoin are likely “diamond-handed wealthy Bitcoin holders” and therefore more likely to hold partial repayments rather than sell the asset outright.

However, Presto said that “100% probability will be — BCH has a “much weaker investor base” and may be 100% sold in the short term.”