Following the listing of ETHPOW (ETHW) several cryptocurrencies saw a major price drop despite some initial success.
ETHPOW drops 80
On the daily chart, the price of ETHW fell over 80% to $25 on September 10, more than a month after its market debut.
First of all, ETHPOW currently only exists as a futures ticker, designed in anticipation of an upcoming Ethereum network update that could split the chain.
By mid-September, Ethereum will undergo a major protocol change, called Merge, which will change its current consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS).
Therefore, Ethereum will phase out its army of miners, replacing them with “validators”, nodes that will perform the same tasks by placing a certain number of tokens on the network.
As a result, existing Ethereum miners will be forced to migrate to other PoW chains or shut down. Ethereum Classic (ETC), which carries the original Ethereum PoW code, is the chain that has benefited the most from being a safe haven for these miners.
For example, the chart below shows Ethereum Classic’s hashrate rising and Ethereum’s hashrate falling in the days leading up to The Merge.
But Ethereum Classic may not be the only choice for ETH miners.
Chandler Guo, is one of the most prominent cryptocurrency miners offers that miners continue to validate and add blocks to the current Ethereum PoW chain after The Merge. This controversial said that a hard fork would maintain the current Ethereum PoW chain, which Guo and his followers called ETHPOW.
And just as the Ethereum blockchain has its native currency in Ether (ETH), the new ETHPOW chain will have its asset called ETHW. Anyone who has ETH before The Merge will receive an equal amount of ETHW after the chain split eventually.
Also Read: Merge May Trigger Ethereum High Volatility, BitMEX CEO warns
However, given the significant downside risk of ETHPOW, traders seem more comfortable holding ETH, allowing them to also receive ETHW if a chain split occurs.
History would suggest $ETH Better to sell PoW forks. ETHW IOUs are now $30-33 (-67% from 1 month ago). I wouldn’t sell the forks — just in case it didn’t happen — and do $ETH which is locked in the contract.
So if you’re quick, think of this as a free 1.7% dividend on yours $ETH. https://t.co/RRCc7kmV24
—Mira Christanto (@asiahodl) September 9, 2022
History suggests that ETH PoW forks are the best selling. ETHW IOUs are now at $30-33 (-67% for a month). I won’t sell the forks – in case that doesn’t happen – and your $ETH will be locked in the contract. So if you’re quick, think of this as a free 1.7% dividend on your $ETH. https://t.co/RRCc7kmV24 — Mira Christanto (@asiahodl) September 9, 2022.
In addition, the drop in the price of ETHW could also suggest that traders are betting that a split from the Ethereum chain is becoming less likely.
The Paradigm report deals another bearish blow to ETHW
In a report published on September 1, the cryptocurrency investment firm Paradigm claims that the cost of an ETHW token should not exceed $18 after its launch. This represents a drop of almost 90% from the high of $198 that the token hit on August 9th.
The company cited “backwardation,” or futures trading below spot prices, in Ethereum futures on Sept. 30 to explain its $18 target for ETHPOW.
The report indicates that some exchanges, including FTX and Deribit, will measure their ETH futures / perpetual rates by referencing the PoS version of Ethereum.
And since the price of ETH futures is currently trading at a $18 discount to spot prices, the ETHPOW token could benefit from a valuation of at least $18 during the potential fork.
“We can infer how much the market believes ETH PoW is worth by looking at the spot-future basis, since spot = PoS + PoW, while the future is just PoS,” a the report explains, adding:
“Currently, the basis suggests that the ETH PoW price will be around $18, which is about 1.5% of the ETH market capitalization. »
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