Futures and options are suggesting they’re expecting the price to drop after the Merge upgrade.
With Ethereum mainnet Merge around the corner, large ETH traders are taking early positions for an imminent rally in the asset class’s price after the upgrade.
Per data compiled by cryptocurrency analytics company Glassnode, short traders are speculating that the price of ETH could rally up to $2,200 from its current $1,800 level in September, the period when the Merge upgrade is expected to be deployed.
Similarly, traders expect Ethereum’s open interest to surge as high as $5,000.
However, some derivative traders are expecting the ETH price to decline massively after the launch of the Ethereum mainnet Merge upgrade.
Glassnode noted that the price drop might be similar to a “sell-the-news” type of situation.
“Post Merge, the left tail, is pricing in significantly higher implied volatility, indicating traders are paying a premium for ‘sell-the-news’ put-option protection post-Merge,” Glassnode analysts said in a note shared by Bloomberg.
With Ethereum Merge expected to occur soon, many miners seem unhappy about the development and have suggested that Ethereum may undergo another fork.
New ETH PoW tokens will be created once the fork is implemented. According to Marc Zeller, Aave’s Head of Developers Relations, many Ethereum investors may borrow ETH coins before the merge in order to earn more ETHPoW tokens.
This move may prompt investors to develop software bots to venture into various decentralized finance apps on the forked ETHPoW chain.
He told Bloomberg: “The second the Merge happens there will be front-running bots that will instantly find every block of POW to empty liquidity pools of Uniswap and others on EthereumPOW, The goal is to sell as many tokens as they can — to get as many EthPOW — the only asset on EthereumPOW chain that may have some kind of value.”
Ethereum Merge Upgrade
ETH Merge is an important process toward Ethereum’s transition from a Proof-of-Work (PoW) algorithm to a Proof-of-Stake (PoS) consensus.
The long-awaited Ethereum Merge was initially scheduled to launch on September 19, 2022. Interestingly, Terence Tsao, an ETH core developer, said yesterday that the upgrade might occur by September 15 or September 16, 2022.
Tsao noted that the date he shared is not certain, as there is a tendency that there could be an adjustment at the last minute.
“Note: nothing is final until it’s in client release, so do expect changes at the last minute due to unforeseen circumstances,” he said.
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