The long-awaited transition of the Ethereum network from proof-of-work to proof-of-stake is set to take place September 15-16 and over the past year traders and analysts have been discussing various outcomes for the upgrade and possible trading strategies.
Let’s take a look at the three options available to investors and traders.
Hodl ETH to win the expected “hardfork” token
The first strategy is relatively simple. Traders can simply buy Ether (ETH) from the spot market and hold it in their exchange wallet, or any platform/wallet that supports forked tokens, and wait for the expected PoW token .
In 2017, when Bitcoin was transitioned to Bitcoin Cash, BTC holders received an equal amount of BCH, which at one point traded for $1,650 per token. At the height of the 2021 bull market, BCH surged all the way to $800.
If PoW tokens from those entities choosing to ignore the merge occur, then finding exchanges that support hard forks would be the place to sell them. Don’t forget to pay your taxes if your country requires you to.
Once people understand that speed to market no longer matters in the face of centralization, censorship and custodians, it will be too late.
Protocol-level censorship is coming. Other guards arrive.
What power do you think the United States has over a publicly traded company?
— $nadjritzcalod (@nadjritzcalod) August 16, 2022
It is also possible that ETH PoW tokens may not pump and clear immediately. Many analysts are sounding off on the risk of centralization towards an Ethereum PoS network, and while that might seem like a stretch, a miner-led PoW ETH fork could gain traction, assuming projects and developers are willing to build DApps. on the blockchain.
Related: Economic Design Changes Will Affect ETH Post-Merger Value, Says ConsenSys Director
Long ETH, short futures
Let’s say you’re a bit skeptical about whether Ethereum will pull through the merger. Many people are. And after that hellish year where Bitcoin (BTC) lost all of its annual gains, Wonderland Money crashed and Terra (LUNA) – now Terra Classic (LUC), Celsius and Three Arrows Capital have robust everyoneit’s perfectly natural to be nervous about a fundamental shift in the second market asset.
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 from the recent “bottom” of $880.
Although long Ether, holding a short position in futures or options contracts helps to protect against losses if ETH corrects sharply and hopefully get the PoW hard fork tokens, this which should further cancel out the losses on the spot position.
The hope of offsetting some of these “losses” by getting the unconfirmed PoW tokens could help finicky Merge traders sleep better at night and maybe lock in some profit.
Stay in stablecoins and just trade the trend
For some investors, the risk of attempting to trade the merger outweighs the reward and getting the “free” PoW hardfork tokens might not be a priority.
These investors might consider simply staying in stablecoins and trade direction, or the strongest trend exhibited by Ether. In this scenario, one would trade either daily breakouts and breakouts or however the short-term trend requires. Many traders expect the merger to be a rumored buy, sell the news-like event, and others expect the price to drop significantly once the merger is complete.
If that’s your view, building and executing a strategy around this anticipated volatility is relatively straightforward if you’re sitting in the stables. These traders could then buy post-dip ETH if they are true believers and if the various PoW tokens generate large volumes on the exchanges, the price fluctuations of the hardfork tokens could also be played.
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 conduct your own research when making a decision.