The long-awaited transition of the Ethereum network from proof-of-work to proof-of-work is set to take place on September 15-16. For a year, traders and analysts have been discussing the various outcomes of the upgrade and possible trading strategies.
Let’s look at three options available to investors and traders.
ETH Hodler won the token that will be issued from the “hardfork”
The first strategy is quite simple. Traders can simply buy ether (ETH) in the spot market and keep it in their exchange wallet, or any other platform/wallet that supports forked tokens, and wait for the expected PoW token.
In 2017, when bitcoin was converted into bitcoin cash, BTC holders received an equal amount of BCH, which at one point traded at $1,650 per token. At the peak of the 2021 bull market, BCH shot up to $800.
If PoW tokens come from those entities that choose to ignore the Merger, then find exchanges that support hard forks where they would be sold. Don’t forget to pay your taxes if you need your country.
Once people realize that speed to market is irrelevant in the face of centralization, censorship and curation, it will be too late.
Protocol level censorship is coming. More keepers are coming.
How much power do you think the US has over a publicly traded company?
— $nadjritzcalod (@nadjritzcalod) August 16, 2022
By the time people realize that speed to market is irrelevant in the face of centralization, censorship and custodians, it will be too late. Protocol level censorship is coming. More keepers are coming. How much power do you think the US has over a publicly traded company? ETH pic.twitter.com/SywlcnZ0tC — $nadjritzcalod (@nadjritzcalod) August 16, 2022.
It is also possible that ETH PoW tokens could not be pumped and dumped immediately. Many analysts question the risk of centralizing the Ethereum PoS network, and while it seems far-fetched, a miner-led ETH PoW fork could gain traction, assuming projects and developers ready to build DApps on the blockchain.
Also read: Changes in Economy Design Will Affect Post-Merge ETH Value, Says ConsenSys Executive
ETH Long and Short Contracts
Let’s say you are a little skeptical about the success of Merge Ethereum. There are many people. And after that hellish year when Bitcoin (BTC) lost all its annual gains, Wonderland Money crashed, and Terra (LUNA) – now Terra Classic (LUC), Celsius and Three Arrows Capital bullied the world, it is perfectly natural to be nervous about it. a fundamental change to the second largest asset in the market.
Hedging is the option for investors with mixed feelings about the Merger. Basically, it’s about being long in Ether, which many holders have been doing naturally and for years, or at least from the recent “low” of $880.
Although it is long Ether, it helps to protect a short position in futures contracts or options against losses if ETH corrects sharply and hopefully receive the signals from the PoW hard fork, which should cancel out more losses on the present.
The hope of offsetting some of these “losses” by receiving the undeclared PoW tokens could help Composite traders sleep better at night and perhaps even profit from their observations.
Stick to stablecoins and just follow the trend
For some investors, the risk of trying to speculate directly on the Merger outweighs the reward and getting the hard “free” PoW tokens is not a priority.
These investors could consider staying in a stable position and trading the direction, or the strongest trend, presented by Ether. In this case, it would be trading the breakouts and daily breakouts or the short-term trend. Many traders expect the Merger to be a “rumor sale” type of event while others expect the price to drop significantly after the Merger.
If this is your view, it is relatively simple to design and execute a strategy around this expected volatility if you are set in stables. You will then be able to buy ETH after the bottom of the wave if you really believe in it, and if the various PoW tokens generate large volumes on the markets, you will also be able to profit from the price fluctuations of the hardfork items.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Cointelegraph.com. All investment and trading involves risk, you should do your own research before making a decision.