Bitcoin
How to trade the risk of an $11 billion Bitcoin sell-off triggered by Mt. Gox and Gemini creditors – DL News
- Selling pressure from a potential $10.5 billion worth of cryptocurrencies is weighing on cryptocurrency markets.
- Short Bitcoin Cash to help earn returns amid risk, says K33.
Creditors of two bankrupt estates may try to withdraw their Bitcoins as soon as they are refunded.It’s a concern for crypto markets – a “solid, adverse and uncertain salvation for the coming months,” says Vetle Lunde, senior analyst at K33 Research.
“The next few months are set to see waves of good old crypto FUD,” or fear, uncertainty and doubt.
The collapse of Gemini and the defunct Mt. Gox platform left creditors out of money worth around 27,600 Bitcoins and 141,000 Bitcoins, respectively.
This equates to around US$10.5 billion.
They are now seeking to be healed. In February, Twins said it will return $1.8 billion to users of its Earn program affected by the collapse of lender Genesis Global Capital.
Another $677 million in Bitcoin Cash, a 2016 fork of the asset of the same name, could be returned to Mt. Gox’s creditors. The Mt. Gox repayment deadline is October.
Investors fear that once these creditors get their money back, they will seek to redeem their Bitcoin for fiat currency, causing a fire.
Lunde said this is yet another concern on top of other problems, including runaway inflation, uncertainty over central bank policy and tensions in the Middle East.
Join the community to receive our latest stories and updates
But, Lunde said, this could present an opportunity. Lunde recommended shorting Bitcoin Cash – saying it is an “attractive strategy” to protect against potential losses when distributions from the Mt.
Once the world’s largest Bitcoin exchange, Tokyo-based Mt. Gox faced a catastrophic collapse in 2014 after $450 million worth of cryptocurrencies at the time disappeared.
Some are not so worried. Even if 30% of the $10.5 billion — about $3.2 billion — were sold in a single day, “I would expect a 5% pullback” in the price of Bitcoin, said Sam Holman, derivatives analyst at Australian trading company Zerocap, told DL News.
“Nothing too drastic,” he said.
Sebastian Sinclair is a market correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com