DD: Why I think BCH will be the true casualty of the Mt. Gox estate payouts

Mt. Gox estate payouts are coming any day now, and while much attention has been focused on Bitcoin (BTC), it's crucial to consider the implications for Bitcoin Cash (BCH). Heres why I think BCH rather than BTC is poised to experience significant downward pressure, backed by detailed analysis of liquidity, technicals, fundamentals, and the sentiment among early BTC holders.

1. Lower Liquidity Compared to BTC:

Bitcoin Cash (BCH) has substantially lower liquidity compared to Bitcoin (BTC). According to recent market data:

• BCH’s average daily trading volume is a fraction of BTC’s.
• The order book depth for BCH is significantly thinner, meaning it takes less volume to move the price of BCH compared to BTC.
• Liquidity constraints exacerbate price volatility, especially during large sell-offs.

The impending Mt. Gox payouts involve substantial amounts of BCH, and given the low liquidity environment, even a relatively small portion of these payouts hitting the market can lead to pronounced price drops.

2. Overall Crummy Technicals:

BCH’s technical indicators have been showing signs of weakness for a prolonged period:

• Price Trends: BCH has consistently been underperforming BTC and other major cryptocurrencies. The long-term price trend is downward, and recent price action has failed to break significant resistance levels.
• Volume Analysis: Trading volumes have been declining, indicating waning interest and participation in BCH markets.
• Moving Averages: BCH prices are below key moving averages (50-day, 200-day), indicating bearish momentum.

In a market where technicals already point to fragility, the sudden influx of sell-side pressure from Mt. Gox payouts can accelerate the downward momentum.

3. Fundamental Issues:

Several fundamental challenges plague BCH, making it less attractive compared to BTC:

• Adoption and Use Case: BCH has failed to achieve the level of adoption and use case success that BTC enjoys. Merchants and users predominantly prefer BTC for transactions and store of value.
• Development and Innovation: The BCH development community is smaller and less active compared to BTC, leading to slower innovation and fewer upgrades.
• Security and Network Health: BCH has a smaller network hash rate compared to BTC, making it more susceptible to attacks and network health issues.

These fundamental weaknesses mean that the market’s confidence in BCH is not as robust, leading to greater susceptibility to negative sentiment and sell-offs.

4. Sentiment Among Early BTC Holders:

Early BTC holders, who are the primary beneficiaries of the Mt. Gox payouts, are likely to have little conviction in BCH:

• Historical Context: These early adopters bought into the vision of BTC and are more likely to view BCH as a lesser offshoot. Many may not see BCH as a valuable part of their portfolio and will prefer to convert it into BTC or fiat.
• Market Psychology: Given BCH’s underperformance and technical/fundamental issues, the incentive to hold BCH is low. The rational move for many will be to liquidate their BCH holdings to reallocate into more promising assets.

This expected behavior will amplify the sell-side pressure on BCH as payouts are distributed.

Conclusion:

The combination of lower liquidity, weak technicals, fundamental challenges, and lack of conviction among early BTC holders sets the stage for a significant sell-off in BCH following the Mt. Gox estate payouts. Traders and investors should be prepared for heightened volatility and potential downward price movements in BCH in the coming days and weeks.

Final Note:

While this analysis paints a bearish picture for BCH, it’s important to approach the market with caution and conduct your own due diligence. Market dynamics can change rapidly, and staying informed is key to making sound investment decisions. This was ofc not financial advice.