The long-awaited transition of the Ethereum network from proof-of-work to proof-of-stake will occur on September 15-16, and for the past year traders and analysts have debated the various outcomes of the upgrade and the possible trading strategies.
Let’s take a look at three options that investors and traders have.
Hold your ETH to earn the expected “hardfork” token
The first strategy is relatively simple. Traders can simply buy Ether (ETH) on the spot market and hold it in their exchange wallet, or any platform/wallet that supports forked tokens, and wait for the expected PoW-based token.
Back in 2017, when Bitcoin forked into Bitcoin Cash, BTC holders received an equal amount of BCH, which at one point traded at $1,650 per token. At the height of the 2021 bull market, BCH reached as high as $800.
If PoW tokens from entities that decide to ignore the merger happen, then looking for exchanges that support hardforks will be the place to sell them. Don’t forget to pay your taxes if your country requires you to do so.
Once people understand 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 custodians are coming.
Protocol level censorship is coming. More custodians are coming.
ETH pic.twitter.com/SywlcnZ0tC
— $nadjritzcalod (@nadjritzcalod) August 16, 2022
By the time people understand 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 guards are coming.
There is also a chance that ETH PoW tokens are not another case of pump & dump. Many analysts are warning of the risk of centralization to an Ethereum PoS network, and while it may sound far-fetched, a miner-led ETH PoW fork could gain traction, assuming projects and developers are willing to build Dapps on the blockchain.
ETH spot long, futures short
Let’s say you’re a bit skeptical about whether or not Ethereum will pull off the merger. Lots of people are. And after this hellish year in which Bitcoin (BTC) lost all of its annual gains, Wonderland Money crashed, and Terra Luna, Celsius, and Three Arrows Capital took the entire world by storm, it’s perfectly natural to be nervous about a fundamental change. in the second largest asset in the market.
Hedging is the option for investors who feel 50/50 about the merger. Basically, one would be long Ether, which many holders naturally are and have been for years, or at least since the recent “bottom” of $880.
While long Ether, holding a short futures or options position allows you to protect yourself from losses if ETH corrects sharply, and hopefully earn the PoW hardfork tokens that should further offset potential losses on the position by counted.
The hope of recouping some of those “losses” by getting the unconfirmed PoW tokens could help merger traders rest easy, and perhaps end up with some profit.
Stay in stablecoins and only trade the trend
For some investors, the risk of trying to speculate on the merger is greater than the reward and getting the “free” PoW hardfork tokens may not be a priority.
These investors might consider simply staying in stablecoins and trading the direction, or stronger trend presented by Ether. In this scenario, one would trade daily breakouts and dips or in whatever direction the short-term trend dictates. Many traders expect the merger to be a “buy the rumour, sell the news” event and others expect the price to drop considerably after the update is complete.
If this is your perspective, crafting and executing a strategy around this expected volatility is relatively straightforward if you’re sitting in the stables. These traders could buy ETH after the crash, if they are true believers, and if the various PoW tokens have high volume on exchanges, the price swings of the hardfork tokens could also be taken advantage of.
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 do your own research when making a decision.
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