On August 1st, BTC chain will split into 2 chains. The market has already started to price in the split, but as I will show you, the process is not entirely over and there are still market opportunities

About the author: 20 years of experience as a derivatives trader in some of the biggest investment banks. in Crypto since 2015.

TLDR

If you want to jump to the trade without reading the explanations here it is

Buy BTC on Bitstamp or Kraken with FIAT or other coins, transfer to your wallet, Fund your BitFinex margin account or Bitmex or Bitflyer margin account and sell BTC short on Bitfinex or Bitflyer, you will get BTC Cash for (almost) free !!!! expected profit anywhere from 50 to 400 usd profit per BTC depending on where the dust settles !!!!!

2. If you can and if you know how to use margin correctly, go margin Long on Kraken vs margin Short on Bitfinex or BitMex.

if you’re margin long BTC anywhere (except KRAKEN) you’re badly on the wrong side of the trade dude, sell your hot potato to anyone else. Only BTC leveraged long which makes sense is on Kraken because long or short leveraged positions are fungible with FIAT

3. Leave as little BTC on exchanges, no interest to do so in BitMex (no BTC Cash credit)

4. Sell Alts Buy BTC until the fork, take profits just after the fork.

5. go short BTC vs fiat after the fork, buy/accumulate BCC below 200–250 usd or after 1 week when the initial selling is done.

ELI5

I will assume the BTC Cash fork goes on , on August 1st.

If it doesn’t, ignore this guide. The market reaction in such a scenario should be a relief rally and reach ATH if the fork is aborted.

If the fork happens, certainly the value of BCC won’t be 0. Some people, if the price is low enough will not sell, or would even consider to buy. On ViaBTC, small trading is going around 15% of BTC price so around 400 USD.

This kind of price might be sold immediately down to 300 200 100 or whatever but not to 0.

In my own case, if I am invested into BTC for the long term i don’t care about 2%. So i wouldn’t sell at 50 USD my BCC. I’d rather keep them and see what happens. After all, some people might think, “this is exactly like Bitcoin, but its faster and 10 times cheaper !!! Why shouldn’t I own some ??” For those who missed the BTC rally which started last year around 300 usd, it looks attractive. I probably believe that the floor price for BCC would be around this kind of price, and any overshoot below that in the first week of trading should be seen as an opportunity to buy.

So put your own number on the value of BCC. For the matter of discussion only, i will assume a fair value is say 200 USD given the huge urge to sell from the consensus view. (on ViaBTC the current value is around 350 USD)

1 BTC — that you own physically in your wallet or one SOME (not ALL) exchanges that stated it clearly — will become 1 BTC plus 1 BCC after the fork.

So if the market was efficient, we should have

(BTC cash price BEFORE Fork) = (BTC cash price AFTER Fork) + (BCC Price)

Now do we have some indications about the market value of those elements on the right side. BCC futures actually trades on ViaBTC at around 15% of BTC price so in the 300–400 USD range. Like it or not, if you have an account at ViaBTC, and you are not a very big player, you can actually trade and lock this price, daily volumes are already over a million USD

Let’s say again that BCC price stabilizes at 200 USD, according to my logic, just after fork time BTC cash price should adjust very quickly and go down by 200 USD.

Now you can tell me nobody trades at ViaBTC and nobody cares, but it is ACTUALLY possible to lock in the value of BCC RIGHT HERE RIGHT NOW

To do so you have to understand margin trading and understand that ONLY if you buy the real BTC then you own BCC. Margin longs and shorts do NOT receive or pay anything against BCC in principle [big exception : KRAKEN !!!]

Then, by now you should have understood that the different between the price of BTC and the margin price of BTC should NOT be equal to 0 but should be much closer to the value of BCC !!!!

because ELSE, all you have to do is BUY BTC (the real stuff) sell it on margin , reverse the position after August 1st, and pocket free BCC !!!!

Lets go in details with exchanges (list is not exhaustive)

BitStamp/Coinbase

there is no margin trading there. if you buy BTC however and leave it on the exchanges, for compliance and security reasons they will NOT credit you any BCC. Hence its ok to buy there but make sure to transfer the BTC to your wallets

BitMex

BTC exist only as collateral. you must deposit BTC to trade. those BTC will NOT give you any benefit of BCC. you will lose it to BitMEX.

In the meanwhile, you can short either perpetual swaps or XBTU7 the future price of BTC in Bitstamp in September 2017 (so even if you don’t understand what a swap is, it should be clear to you that at least its safe shorting the future because its about trading the price of Bitcoin AFTER the fork). swaps or XBT are derivatives. For every long there is a short. the short obviously has no BCC to give to anyone so longs of the swaps or futures won’t get anything. Anyway BitMex has issued a clear statement in this regards.

https://blog.bitmex.com/site_announcement/policy-on-bitcoin-hard-forks/

There shouldn’t be any jump in the quoted price of the future at fork time. However the price should readjust BEFORE and it should trade 200 USD cheaper than BitStamp.

PS there are some technical subtleties with the perpetual swaps which cost 0.3% !!! every 8 hours so that justifies its higher price to the futures. you have to factor that into the right selling price. However when we approach fork time the funding advantage of the swaps disappears and it becomes a good short. the swaps is more liquid than the future. but the future is the more perfect hedge.

BitFinex

It is possible to buy and sell on margin BTC at the SAME price than the exchange price

The price of BTC before the fork on those exchanges should thus reflect the BCC price inside and there should be a nonlinear drop in the price after fork time.

It might be dangerous to leave money here if they confuse the 2 type of accounts resulting in losses for the exchange. However apparently the ETH fork went smoothly one year ago so they may handle it well again

Given there are existing margin longs on those exchanges and they accept trade both ways, i think it could be quite chaotic in those exchanges when margin longs try to exit and specs try to arbitrage buying more physical BTC.

https://www.reddit.com/r/BitcoinMarkets/comments/6pxbxn/bitfinex_bitcoin_cash_bch_token_distribution/

Kraken

Like BitFinex it is possible to go margin long or short at the same price that a physical trade. there is even a mechanism to settle margin trades for free.

Beware,However the situation is MUCH different than BitFinex

People who are margin short on Kraken of BTC are ALSO margin short of BCH !!!

People who are margin long on Kraken are ALSO long of BCC !!!

i highly recommend margin longs on Kraken.

For those who are margin short of BTC on Kraken, you’ve just being short something worth 400 USD on another exchange. RIP

https://www.reddit.com/r/BitcoinMarkets/comments/6q06sl/kraken_bitcoin_cash_and_a_critical_alert_for/

BitFlyer

Only the physical bitcoin BTC-JPY will carry BCC benefits, NOT BTC-FX !!!!!

the CFD should trade at a discount to the real BTC. the situation seems cleaner and BitFlyer is an exchange supported by the major local banks. Given the whole situation it looks like a relatively safer place to bet but accidents can happen anywhere

お客様の資産は守られます。8 月 1 日の BCC 分岐が恒久的であると当社が判断した場合、お客様はビットコイン、及び Bitcoin Cash 両方の資産を持つことになります。当社は、分岐前にお客様の bitFlyer アカウントで保有されていたビットコイン現物の数量と同量の Bitcoin Cash をお客様に付与します。

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As the market reprices correctly cash and futures, the process may be quite chaotic given there are still active bots trying to arbitrage cash and futures like if it was a normal environment. As long as those bot owners don’t unplug their bots, they will get hit until they can’t take it anymore LOL. Before that happens any large sell order on futures will drive BitStamp down as well while that would be balanced by cash orders on the other side if arbs execute at the same time both part of the trade.

After the bots are unplugged i expect liquidity to disappear quickly in futures as they reprice to some wider level (100 USD ? 150 USD ?) it could overshoot the other way (300 USD?) because of margin calls and liquidations ???

it would disappear in BTC itself as well. with little bids and offers and little BTC on margin to lend (because if you LEND your BTC you will NOT get your BCC) it will be quickly IMPOSSIBLE to short BTC as lending rates go through the roof to reflect the arbitrage. As a consequence, ALT vs BTC pairs should collapse (BTC outperforming all ALTS) in a massive squeeze. BTC physical price could also squeeze up to new ATH as the market becomes crazy, and there is no more liquidity only to collapse just after the fork.

――- if it was a stock split or similar event in sophisticated markets, market liquidity would grow very thin going into the event as people square positions, the price gap would effectively be observed and transactions would resume at the new expected fair price little by little after which it is accepted by participants and everything goes back to normal

CONSPIRACY THEORIES

For those who cared to notice, it has been one week that KRAKEN BTC price in EUR was 1 to 1.5% ABOVE the equivalent price you would get from BitStamp, enticing arb traders to sell short on Kraken buy on BitStamp or BitFinex. It looks like the Kraken owners planned it in advance to accumulate a huge long leveraged position in BTC.

On the other hand, the smart guys in BitMex realized the profit potential by indicating that the future would NOT receive any BCC benefit, they backed their asses early and loaded the trade for them. The owners of BitMex are ex-derivatives traders and they even organize arbitrage seminars all over Asia. No doubt they had this arbitrage in mind when they set up their rules.

About Arthur Hayes (BitMex owner) After graduating with a degree in economics from the Wharton School of Business, Arthur lived in Hong Kong as an equity derivatives trader. He was the market-maker for Deutsche Bank and Citibank’s Exchange Traded Funds (ETF) businesses. He also has extensive experience trading equity index futures, forwards, and swaps as well as non-deliverable FX forwards. Arthur brings a deep understanding of how to structure and trade financial derivatives.

CONCLUSION

Anyway see guys for yourselves, the market has moved and spoken a bit already, other much bigger guys than me already are in the trade.

I managed to buy BitStamp and Kraken sell BitMex for a pickup of up to 50 USD, now its trading well the other way and there is 100 200 or 400 ? more to go !!!!! not too late to jump in, and don’t be the one holding the bag (those margin longs !!!)

Some (random ?) price target guesses

based on my valuations, charts and instinct

before/into the fork

BTC Future back to ATH a bit above 3,000 usd

real BTC 15% to 20% above that so around 3,600 usd

ETHBTC back to 0.045 around 160 usd, XRP,ZEC… experiencing similar declines than ETH.

after the fork

ETC/ETH redux scenario. BCC becomes the best performing crypto while we have a bear market vs fiat led by BTC in almost everything else. BCC could reach 50% of BTC price with BTC declining to around 1800 usd. ETH would be heading for double digit prices.

Here are the words from Bitcoin Jesus himself

The common wisdom is that 80% of traders want to dump their BCC on day1. But with BCC being 10 or 15% of BTC price you just need that the remaining guys sell their BTC into BCC to balance that selling !! You need much less buying to support a BCC price than a BTC price and selling 1 BTC gives you firepower to buy 6 or 10 BCC !!! Thats why, like the ETH/ETC fork you will see speculators jump into the new coin which presents fresh upside compared to an overbought and overextended market like BTC.

Last words

This is my best guess on the market.

I may not be right on everything. Actually I even might be proven all wrong on all counts.

Do your own homework. These are NOT recommendations to trade for you. It’s a self-recommendation of list trades for me. What is appropriate for me may not be appropriate for you. Trading in crypto may lead to large profits or large losses. I am not liable for the losses due to your trading decisions or trading no-decisions.

We may only agree that the market will be very illiquid and volatile due to this fork event and that if you don’t know, you shouldn’t trade and stay out of crypto.