The long-awaited transition of proof-of work to proof-of stake will take place on September 15-16. Analysts and traders have been discussing different outcomes and potential trading strategies for the upgrade.
Let’s look at three options that traders and investors have.
Hodl ETH will earn the “hardfork” token
This is the simplest strategy. The first strategy is simple. Traders can buy Ether ( ETH) on the spot market, hold it in an exchange wallet or any other platform that supports forked tokens, then wait for the PoW token.
In 2017, Bitcoin Cash was forked into Bitcoin Cash. BTC holders were given an equal amount in BCH. At one time, the token traded at $1,650. BCH soared to $800 during the peak of the 2021 bull markets.
To sell PoW tokens of entities that ignore the Merge, you should look for exchanges that allow the hard forks to be supported. If your country requires you to, don’t forget about paying your taxes.
It won’t be too late if people realize that speed to market is not important in the face centralization, censorship, and custodians.
Protocol-level censorship is on the horizon. There are many custodians.
What power do you believe the US holds over a publicly traded company
— $nadjritzcalod (@nadjritzcalod)
August 16, 2022
It is possible that ETH PoW tokens will not immediately pump and dump. Analysts are concerned about centralization of PoS Ethereum networks. While it might sound unlikely, a miner-led PoW ETH Fork could gain ground if developers and projects are ready to create DApps on blockchain.
Related: ConsenSys exec says that ETH’s value will be affected by economic design changes after Merge
Short futures, long ETH
Let’s suppose you are a little skeptical that Ethereum will pull off the Merge. Many people are. After a year in which Bitcoin ( TTC), lost all its annual gains, Wonderland Money crashed, and Terra (LUNA), now Terra Classic (LUNC), Celsius, and Three Arrows Capital, everyone is naturally nervous about a fundamental shift in the market’s second largest asset.
Investors who feel 50/50 about Merge can choose to hedge. One would need to be long Ether (which many holders are naturally and have been since the $880 “bottom”).
Long Ether can be protected by holding a short position on futures or options contracts. This will allow one to avoid losses if ETH falls sharply. One also has the opportunity to obtain PoW hard fork tokens which should cancel out any losses from the spot position.
It is possible to make up for some of the “losses” by acquiring unconfirmed PoW tokens, which could help Skittish Merge traders sleep better at nights and possibly turn a profit.
Trade the trend and stay in stablecoins
Some investors may not prioritize the Merge trade because of the high risk.
Investors might be more comfortable staying in stablecoins or trading direction. This is the strongest Ether trend. This scenario would see one trade daily breakouts and breaks or the direction that Ether’s short-term trend directs. Many traders expect the Merge will be a buy-the-rumor, sell-the news-type event. Others anticipate a significant price drop after the Merge.
This is how you see it. If one is in stables, crafting and executing strategies around the anticipated volatility is easy. If they are true believers, these traders could purchase post-dip Ethereum. Also, if PoW tokens have large volumes on exchanges it could be possible to play the price swings for hardfork tokens.
These views and opinions are the author’s and do not necessarily reflect those of Cointelegraph.com. You should do your research before making any investment or trading decision.