Singapore-based Presto Labs Recommends Market-Neutral Trade Strategy for Bitcoin and Bitcoin Cash

Singaporean trading firm Presto Labs is advising its clients to consider a market-neutral trade strategy focusing on the strength of bitcoin (BTC) and the potential weakness of bitcoin cash (BCH) in light of the ongoing Mt. Gox repayments.

Last week, the defunct exchange Mt. Gox initiated repayments to creditors affected by a 2014 hack, flooding the market with hundreds of millions worth of BTC. In contrast, over $73 million worth of BCH is expected to be distributed to traders in the upcoming months, a significantly lower amount compared to the BTC repayments which amount to $9 billion.

“The Mt. Gox’s Rehabilitation Trustee is planning to distribute multi-billion dollars worth of BTCs and BCHs from July 1st to October 31st, 2024,” noted Presto’s market analysts led by Peter Chung. This is anticipated to impact the supply and demand dynamics of BTC and BCH, potentially creating an opportunity for pair trading.

Pair trading involves simultaneously buying and selling two financial assets to benefit from their relative price movements. Presto recommends a strategy of going long on BTC perpetuals while shorting BCH perpetuals as a market-neutral approach to capitalize on this scenario, while also highlighting the potential funding rate risk.

CoinGecko data indicates a stark contrast in trading volumes between the two cryptocurrencies, with over $27 billion worth of BTC traded in the past 24 hours compared to $180 million of BCH.

Presto’s analysis also considers the investor base for each cryptocurrency, suggesting that early bitcoin holders, often referred to as “diamond-handed wealthy Bitcoiners,” are more likely to retain a portion of their repayments rather than immediately selling the asset. On the other hand, BCH holders are expected to have a weaker stance, potentially leading to a higher percentage of BCH being sold in the near term according to Presto.