Investment strategy around The Merge event

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The Merge, the most important event in 2022 will take place this September. Investors have come up with investment strategies around this highly anticipated event. Here are some picks from current traders and investors.

Hold ETH waiting for “airdrop” from Ethereum hardfork

As reported by MarginATM (here), in parallel with the transition from proof-of-work to proof-of-stake, the “left behind” miners established another Ethereum chain that still retains the mechanism. proof-of-work consensus.

When The Merge happens and Ethereum moves to proof-of-stake, the chain split event by miners will lead to the emergence of two or more chains with two different consensus mechanisms, POW and POS.

This is seen as an opportunity for Ethereum holders. According to olimpio, a popular investor on Twitter, when the chain split occurs, the on-chain assets you have on Ethereum will “double”.

“All you have before the split will live on both the new POS chain and the POW chain like NFT and wallet assets; liquidity on a protocol like Uniswap; Lending position on Aave, Compound,” olimpio said.

Before that, BCH, BTG or ETC were all chains that were split during the hard fork event from the main chains like Bitcoin or Ethereum. Although not comparable to the main chain, these are considered to be the largest “airdrops” in crypto history. At the current time, the market capitalizations of Bitcoin Cash and Bitcoin Gold are $2 billion and $500 million respectively. (According to CoinGecko)

Three coins born from the Bitcoin hard fork event

Although many argue that the ETH proof-of-work chain will not be able to succeed like ETC, BCH and BSV. The main reason is that the chain created by these miners does not receive support from the community. However, investors can still make a profit through the sale of the tokens they receive on this new chain.

The strategy given by olimpio is to “sell all new on-chain assets to ETHPoW and then move them to CEXes to be tradable. As reported by MarginATM (here), the ETH PoW coin will be centralized by a number of exchanges such as Poloniex, Huobi, Binance …

Ethereum Futures Trading

Hedging will be an option for investors who feel “50/50” about The Merge event. Hedging is when an investor opens a position in contrast to the one he is holding.

As reported by MarginATM (here), Tim Beiko, a member of the Ethereum Foundation announced The Merge event will take place in September 2022. This makes community sentiment more positive and motivates investors. accumulate Ethereum in the hope that Ethereum will increase in price.

According to Tradingview, ETH has increased by more than 129% to the threshold of USD 2030, the highest level in the past 2 months.

Ethereum is up more than 100% in two months (Source: Tradingview)

However, the majority of investors holding Ethereum will open a short position in futures or options contracts to hedge risk. This will help investors minimize losses in case The Merge goes down while they can still profit from receiving tokens from the proof-of-work chain forked from Ethereum.

Indeed, the price of Ethereum futures contracts is below the spot price, showing that investors are wary of the risk of falling prices after The Merge event.

During an interview at the Ethereum Community Conference, Vitalik Buterin himself, the founder of Ethereum, also predicted that the price of ETH would fluctuate greatly when The Merge event started happening. However, Vitalik also thinks that the price of Ethereum will continue to increase after The Merge is completed.

Source MarginATM

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