Bitcoin Cash, Not Bitcoin, at the Center of Mt. Gox Catastrophe: Analyst’s Analysis

Mt. Gox’s bankruptcy redemptions are bearish for Bitcoin Cash (BCH) rather than Bitcoin (BTC), according to Presto Labs’ Peter Chung. The fear that the estate of Mt. Gox will cause a drop in Bitcoin’s price is unfounded, but it could spell trouble for Bitcoin Cash due to selling pressure from bankruptcy redemptions. Chung highlighted this in a recent note.

As Bitcoin’s price dipped below $60,000, with over $200 million in liquidations at the start of trading in Asia on Thursday, CoinDesk reported. Mt. Gox is set to return $73 million worth of BCH to its former customers, equivalent to over 20% of the token’s daily trading volume.

Comparing the impact on Bitcoin and Bitcoin Cash, Chung noted that the selling pressure on BCH would be significantly higher. While the former exchange will return roughly $9.5 billion in BTC to customers, the 143,000 BCH being sent back is worth around $73 million, representing approximately 24% of Bitcoin Cash’s daily trading volume.

Chung emphasized that traders are likely to treat the BCH redemption as an airdrop and sell it immediately, given that Bitcoin Cash’s fork occurred three years after Mt. Gox’s bankruptcy. He mentioned that creditors are not fully aware of Bitcoin Cash’s background.

In an interview with CoinDesk, Chung mentioned that BTC is expected to have limited selling pressure as those who wanted to exit could have done so through bankruptcy claim markets. He highlighted that weak-handed creditors had ample opportunities to exit over the past decade, leading to the assumption that the current group consists of steadfast BTC bulls.

Chung recommended a market-neutral strategy of long BTC perpetuals paired with short BCH perpetuals to express this view efficiently, considering funding rate risk. For those interested in locking in a funding rate, he suggested exploring other options such as shorting term futures or borrowing BCH in the spot market.

Bitcoin Cash is currently trading at $360, down 3.8%, according to CoinDesk Indices data. The analysis was edited by Parikshit Mishra.

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