Analysts suggest Mt. Gox's redemptions could heavily impact Bitcoin Cash (BCH) due to its lower liquidity, while Bitcoin (BTC) remains less affected.
As Mt. Gox prepares to return funds to its creditors, concerns have emerged about the potential impact on the cryptocurrency market. While fears of a Bitcoin (BTC) price drop are widespread, analysts at Presto Labs argue that Bitcoin Cash (BCH) faces a much greater threat due to its lower liquidity and substantial redemption volume.
Key Points:
Mt. Gox Redemptions Overview:
Mt. Gox will return approximately $9.5 billion in BTC and $73 million in BCH to its creditors.
The redemptions come from the bankruptcy proceedings of the defunct exchange.
Impact on Bitcoin Cash:
BCH's redemption amount constitutes 24% of its daily trading volume, compared to just 6% for BTC.
Analysts expect a significant selling pressure on BCH, which could lead to a steep price decline.
Bitcoin Less Affected:
BTC's larger market and higher liquidity provide a buffer against massive sell-offs.
Many BTC creditors have already sold their claims, leaving mainly strong holders ("diamond-handed BTC bulls").
Analyst Insights:
Peter Chung of Presto Labs notes that BCH will be treated like an airdrop by creditors, who are likely to sell immediately.
Suggested market-neutral strategies include long BTC perpetuals paired with short BCH perpetuals to manage funding rate risks.
Current Market Status:
BCH is currently trading at $360, down 3.8%, with traders anticipating further declines.
Bitcoin's price continues to hover below $60,000 amid broader market sell-offs.
While the impending Mt. Gox redemptions have sparked fears of a market downturn, the primary impact is likely to be felt by Bitcoin Cash due to its lower liquidity and high redemption volume. Bitcoin, with its more robust market, appears better positioned to absorb the sell-off pressure.
Source: Coindesk
Comments