Market Meditations | August 9, 2022
The Merge. It feels like a part of crypto folklore that has been around forever; the pain in grandma’s candlelit eyes of what has been, only offset by a slight smile of hope for the future. No time for emotional distraction. The market has jolted into action and people are positioning:
- The Ethereum merge with the Beacon Chain is purportedly planned for September 19th.
- This move to a Proof-of-Stake consensus mechanism will use much less energy as mining disappears.
- Currently miners are rewarded 2 ETH plus transaction fees for every block. No mining rewards means issuance of ETH will drop by >90%.
- This move “sets the stage for future scaling upgrades”, and has the potential to lower gas fees, though this will not be seen immediately.
- For seven straight weeks, investors have poured more than $150 million into Ethereum-based assets, due to “greater clarity” on the merge timing.
- Glassnode believes derivatives traders are setting up for a large-scale “buy the rumour, sell the news” event by hedging their bets with pre-Merge Call options and post-Merge Put options (as insurance).
- Vitalik Buterin has said that the merge may not actually be priced in until it occurs, both from a market and psychological perspective.
FTX has stated that it “does not have any plans to halt or settle ETH futures prior to the Merge”, and that they will do their best to support continuous trading.