Mt. Gox, once the world’s largest Bitcoin exchange, is now beginning to repay creditors affected by its 2014 hack. This massive distribution has sparked traders to develop profit strategies. According to a note shared with CoinDesk, Presto Labs, based in Singapore, advises a market-neutral tactic: betting on Bitcoin (BTC-USD) strength while shorting Bitcoin Cash (BCH-USD). Presto market analysts, led by Peter Chung, communicated this strategy to CoinDesk on Wednesday.
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The Trading Strategy Explained
Presto Labs sees a prime trading opportunity due to the sheer volume of BTC and BCH entering the market. Over the next few months, $9 billion worth of BTC and $73 million worth of BCH will be distributed. The trading firm anticipates a significant impact on supply and demand dynamics. They predict BCH will face more selling pressure than BTC, creating a potential for profitable trades.
Supply and Demand Dynamics
Presto’s analysis shows that BCH’s daily trading value will see a 24% increase in selling pressure, compared to just 6% for BTC. This disparity offers a lucrative opportunity for pair trading—simultaneously going long on BTC and short on BCH. Presto believes this approach minimizes market risk while maximizing potential gains.
Why Bitcoin Might Hold Strong
An interesting twist in Presto’s strategy is the assumption about BTC holders. The firm suggests that many of the early Bitcoin investors, often termed “diamond-handed,” are likely to hold onto their assets rather than sell immediately. This behavior contrasts sharply with BCH investors, who are expected to sell quickly.
Potential Market Movements
The influx of such substantial assets can cause volatility, but Presto’s strategy aims to capitalize on these fluctuations. The firm’s approach is grounded in the belief that the robust demand for BTC will keep its price stable, if not rising, despite the increased supply. Meanwhile, BCH is expected to struggle under the weight of new supply.
What Is the Price of BCH and BTC?
As of the current writing, Bitcoin Cash is trading just below $343.
Additionally, Bitcoin is sitting at $58,279, at the time of writing.
Key Takeaway
For investors, this scenario offers a fascinating glimpse into market strategies around major crypto events. Presto’s market-neutral trade recommendation, leveraging the different pressures on BTC and BCH, provides a calculated method to navigate this complex situation. As always, the crypto market remains unpredictable, but informed strategies like these can offer a clear path forward.
