$ETH: Crypto Investment Director Explains How Traders Are ‘Positioning for the Merge’

On Wednesday (Aug 31), Mira Christanto, Investment Director of Luno Expeditions, a wholly owned subsidiary of Digital Currency Group (DCG), took a closer look at Ethereum’s upcoming Merge update and how people can profit from it. .

Ethereum’s upcoming “Merge” update, which marks the Ethereum network’s transition from proof-of-work (PoW) to proof-of-stake (PoS), is expected to take place between September 10 and September 20.

Here’s how the Ethereum Foundation explains the merge:

Merging represents the merging of Ethereum’s existing execution layer (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain. Eliminate the need for energy-intensive mining and instead protect the network by using ETH in staking. A truly exciting step in realizing the Ethereum vision: more scalability, security and sustainability.

It is important to remember that initially the Beacon Chain was shipped separately from Mainnet. Ethereum Mainnet – with all its accounts, balances, smart contracts and blockchain status – continues to be protected by proof-of-work, even as the Beacon Chain operates in parallel using proof-of-stake. Merger approaches as these two systems finally merge and proof-of-work is permanently replaced by proof-of-stake.

Let’s consider an analogy. Imagine that Ethereum is a spaceship that is not yet ready for interstellar travel. With the Beacon Chain, the community built a new engine and reinforced hull. After significant tests, it is almost time to hot replace the new engine with the old flight vehicle. This will merge the new, more efficient engine into the existing ship, ready to enter some serious light-years and take on the universe.

Yesterday Christanto started talking about Merge on Twitter explaining what it means:

It is a migration of the Ethereum consensus mechanism. From “Proof of Work”, in which miners validate transactions and protect the network, to “Proof of Stake”, in which those who bet $ ETH (blocking it as an interest-bearing account) will validate the blocks.

Next, he talked about the benefits of the merger:

  • Expensive to stick without the cost of energy (99.95% reduction in energy consumption). Currently, 11% of $ ETH the offer is up for grabs. An attacker would need> 50% or $ 20.5 billion (assuming $ ETH the price does not change or if no one rejects the attacker)
  • Slow (or even the other way around) $ ETH inflation: bulk rewards (or new ETH tokens issued with each block) will decrease by -90% from 2.0 to 0.2 ETH. In addition, some gas taxes will be burned. This removes $ 16.5 million of daily selling pressure from miners having to cover their own operating expenses

The most interesting part of his Twitter thread was the part about how people trade the Merge:

Christanto said that these are the “folk crafts”:

  • Do nothing and wish for ETH, for HODLing
  • Taking ETH out of exchanges that don’t support forks, into a wallet that makes (like MetaMask) to receive ETH fork airdrops

And that these four four are the most complex / risky trades:

  • Borrow ETH against USDC (or other stablecoins that don’t support Eth forks) so that any fork airdrop can be sold
  • Long ETH and short ETH or ETH futures with staking. Unlike ETH commercials, $ stETH does not receive airdrops
  • Long ETH and short ETC. The ETC usually recovers before the ETH forks and plummets afterwards
  • Long Lido ($ LDO), Rocket Pool ($ RPL), Ankr ($ ANKR), Stakewise ($ SWISE) which nearly doubled from their year-to-date lows. Below is a division of the bigger players

Image credit

Featured image via Pixabay


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