Mt. Gox Repayment Plan and Match Trading Opportunities

Between July 1 and October 31, 2024, Mt. Gox will distribute billions of dollars worth of BTC (Bitcoin) and BCH (Bitcoin Cash) to creditors. This massive repayment plan could have a significant impact on the supply and demand dynamics of BTC and BCH during these four months, opening up opportunities for pair trading. Presto market analyst Peter Chung elaborated on this view in his report.

pairs trading strategy

Pairs trading is a market-neutral trading strategy whose core idea is to establish long and short positions between two highly correlated assets in order to profit from their relative price movements. This strategy usually requires investors to operate when the price difference between two assets deviates from the historical mean.

+ Communication Junyang: 954737157 means shorting assets with higher prices and going long with assets with lower prices, waiting for the prices of the two to return to an equilibrium state.

Analysis of selling pressure on BCH and BTC

Chung’s analysis pointed out that the selling pressure on BCH will be four times that of BTC. Specifically, 24% of BCH’s daily trading volume may face selling pressure, while only 6% of BTC’s daily trading volume may face selling pressure. This difference is mainly due to the relatively weak investor base of BCH and the fact that creditors may be more inclined to regard BCH as an "airdrop" and cash out immediately.

Long BTC perpetual contract paired with short BCH perpetual contract

Chung suggested that in order to express this view and effectively utilize a market-neutral strategy, investors can consider pairing trades of long BTC perpetual contracts and short BCH perpetual contracts. A perpetual contract is a derivatives contract with no expiration date that allows traders to enter or exit the contract at any point in time and to use leverage to amplify the potential for profits and losses.

By going long BTC perpetual contracts and shorting BCH perpetual contracts, investors can make profits when BTC prices rise and BCH prices fall. The benefit of this strategy is that it is market neutral, meaning that as long as the price difference between the two assets changes, regardless of the overall market trend, investors are likely to profit.

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