- Selling pressure from a potential $10.5 billion in crypto is weighing on crypto markets.
- Short Bitcoin Cash to help bag returns amid the risk, says K33.
Creditors from two bankruptcy estates may seek to cash out their Bitcoin once theyâre reimbursed.Itâs a worry for crypto markets â a âsolid, adverse, uncertain overhang for the coming months,â says Vetle Lunde, senior analyst at K33 Research.
âThe next months are rigged to see waves of good old crypto FUD,â or fear, uncertainty, and doubt.
The collapse of Gemini and defunct platform Mt. Gox left creditors out of pocket to the tune of some 27,600 Bitcoin and 141,000 Bitcoin, respectively.
That amounts to roughly $10.5 billion.
Theyâre now seeking to be made whole. In February, Gemini said it will return $1.8 billion to users of its Earn programme affected by the collapse of lender Genesis Global Capital.
A further $677 million in Bitcoin Cash, a 2016 fork of the eponymous asset, could be returned to Mt. Gox creditors. Mt. Goxâs final deadline for repayments is in October.
Investors worry that once those creditors get their money back, theyâll seek to redeem their Bitcoin for fiat, sparking a firesale.
Lunde said itâs yet another worry on top of other woes, including rampant inflation, uncertainty about central bank policy, and tensions in the Middle East.
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But, Lunde said, that could present an opportunity. Lunde recommended shorting Bitcoin Cash â saying itâs an âappealing strategyâ to hedge against potential losses when the Mt. Gox wallet distributions begin.
Once the worldâs largest Bitcoin exchange, Tokyo-based Mt. Gox faced catastrophic collapse in 2014 after $450 million worth of crypto at the time went missing.
Some arenât so worried. Even if 30% of the $10.5 billion â some $3.2 billion â were sold in a single day, âIâd expect a 5% pullback,â in Bitcoinâs price, Sam Holman, derivatives analyst at Australian trading firm Zerocap, told DL News.
âNothing too drastic,â he said.
Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com