The Ethereum community’s long-awaited transition from proof-of-work to proof-of-stake is about to happen from Sept 15 to 16 and for the final yr, merchants and analysts have been discussing varied outcomes for the improve and doable buying and selling methods.
Let’s check out three choices traders and merchants have.
Hodl ETH to earn the anticipated “hardfork” token
The primary technique is comparatively easy. Merchants can merely purchase Ether (ETH) within the spot market and maintain it of their trade pockets, or no matter platform/pockets will assist forked tokens, and look ahead to the anticipated PoW token.
Approach again in 2017, when Bitcoin was forked to Bitcoin Money, BTC holders acquired an equal quantity of BCH, which at one level traded for $1,650 per token. On the top of the 2021 bull market, BCH rallied as excessive as $800.
If PoW tokens from these entities that select to disregard the Merge occurs, then discovering exchanges that assist the exhausting forks can be the place to promote them. Don’t overlook to pay your taxes in case your nation obligates you to take action.
As soon as folks perceive that velocity to market is irrelevant within the face of centralization, censorship and custodians, it is going to be too late.
Protocol degree censorship is coming. Extra custodians are coming.
How a lot energy do you suppose the US has over a publicly traded firm?
— $nadjritzcalod (@nadjritzcalod) August 16, 2022
There’s additionally a risk that ETH PoW tokens gained’t instantly pump and dump. Many analysts are sounding off in regards to the danger of centralization to a PoS Ethereum community, and whereas it could sound far-fetched, a miner-led PoW ETH fork might achieve floor, assuming tasks and builders are keen to construct DApps on the blockchain.
Lengthy ETH, brief futures
Let’s say you’re a tad bit skeptical about whether or not Ethereum will efficiently pull off the Merge. Lots of people are. And after this hellacious yr the place Bitcoin (BTC) misplaced all of its yearly features, Wonderland Cash collapsed and Terra (LUNA) —now Terra Traditional (LUNC), Celsius and Three Arrows Capital rugged everyone, it’s perfectly natural to be nervous about a fundamental change in the market’s second largest asset.
Hedging is the option for investors who feel 50/50 about the Merge. Basically, one would be long Ether, which many holders naturally are and have been for years, or at least from the recent $880 “bottom.”
While long Ether, holding a short position in futures or options contracts allows one to protect against losses if ETH corrects sharply and hopefully obtain the PoW hard fork tokens, which should further cancel out losses on the spot position.
The hope of making up some of those “losses” from gaining the unconfirmed PoW tokens could help skittish Merge traders sleep better at night and perhaps wrap things up in profit.
Stay in stablecoins and just trade the trend
For some investors, the risk of attempting to trade the Merge outweighs the reward and obtaining the “free” PoW hardfork tokens might not be a priority.
These investors might consider just staying in stablecoins and trading direction, or the strongest trend presented by Ether. In this scenario, one would either trade daily breakouts and breakdowns or whichever way the short-term trend dictates. Many traders anticipate the Merge to be a buy the rumor, sell the news-type event and others expect the price to dump considerably after the Merge is complete.
If this is your perspective, then crafting and executing a strategy around this anticipated volatility is relatively simple if one is sitting in stables. These traders could then purchase post-dip ETH if they’re true believers and if the various PoW tokens put up heavy volumes on exchanges, the price swings in hardfork tokens could also be played.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.