The Ethereum (ETH) futures market showed a dip in relation to the spot asset price on Monday (8). Three-month ETH contracts are trading at the biggest discount ever since Collide Covid-19 in March 2020.
Data provided by analytics platform Skew shows that three-month futures contracts listed on crypto exchange Binance are trading at a steep annual discount of 6% on the spot price, while exchanges OKEx and FTX are seeing a drop of more than 6%.4%.
The futures markets usually offer a premium, but in the case of Ethereum, it evaporated earlier this month.
The reversal appears to have occurred when traders took short positions to protect their exposure to the bullish spot market caused by the “merging” update, which is part of Ethereum 2.0. They will price – and try to guarantee profits on top of that – the possibility of “doubling” the currency network, in a process known as hard fork.
Ethereum Fusion — a network upgrade that will combine the existing Proof of Work (PoW) blockchain with a Proof of Stake (PoS) blockchain released in December 2020, called “Beacon Chain” — is likely to take place in September.
Last month, Ethereum founder Tim Beiko mentioned September 19 as the tentative date for the merger. ETH has rallied since then, but even with several tests already in place, analysts are indicating some caution about the event, given the complexity of the procedure.
Chinese miner Chandler Gu, well known in the industry, is opposed to this modernization, and is in favor of maintaining the existing network mining mechanism. If Guo’s move gains momentum and other miners are convinced of it, the Ethereum network could split into two parts, each with a cryptocurrency.
In a cryptographic environment, the success of updates depends on the commitment of users and miners (or auditors). Unlike common software, in cryptocurrencies, it is the network participants who decide which version to adopt after the change, not the company that developed it.
If this “doubling” really happens with Ethereum, users who hold ETH today will get a new network token for free, which will be called “ETH PoW” — the coins will co-exist, each on a different network. Something similar happened with Bitcoin (BTC) in 2017, when Bitcoin Cash (BCH) came out.
“The ETH futures market is absorbing this possibility.” [de que o hard fork aconteça]Ainsley To, Senior Research Analyst at Genesis Global Trading, said, referring to cryptocurrency futures:
“This reflects the demand for hedge or collar The most popular now among traders: buy ETH on the spot market to try to win on the upside and be eligible to win the ETH PoW token in the event of a fork, and use ETH futures to hedge against this exposure,” said To.
QCP Capital, which specializes in crypto derivatives, expressed a similar view last week, saying that anyone who “holds their own ETH will earn an additional ETH PoW token without risking the price on ETH because the long position is protected by futures trading.”
QCP occupies a large position in the so-called “risk-free trading” where each position has an equivalent protection. With the gap between the futures and spot markets expected to deepen as the merger approaches, the company announced on its Telegram channel that it intends to hold the position for some time.
Ethereum founder Vitalik Buterin does not expect the potential hard fork to have a lasting impact on the new network after the upgrade. However, some exchanges, including BitMEX, Poloniex and OKEx, have announced their support for the potential fork — meaning if it does, they will accept the new ETH PoW token.
Tron founder Justin Sun also came to the defense of the multiplication (or ramification) of the network, promising to support the development of the new Ethereum that would emerge after the merger.
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