Derivative data shows that the Ethereum rally could end abruptly with a ‘sell the news’ event. The leading altcoin has been continuing its rally since July 27 with the upcoming merge.
As altcoin investors buy the merge news, experts warn of possible correction
Prior to the Ethereum merge upgrade, the cryptocurrency market remains a center of attraction. However, some analysts point out a possible price correction after the merger. As Bloomberg reported in August, derivatives markets in particular show investors gravitating towards call options that anticipate a rally ahead of the September update, while futures and options show that investors expect the value to decline in a “sell the news” scenario.
In particular, investors expect Ethereum to rise to around $2,200.
anticipation of withdrawal
Interestingly, there is a downward trend following the revised merge around September 15th. Therefore, we can conclude that some investors are expecting a decline after the merger. Glassnode analysts summarize the prospects as follows:
Post-merge is priced with significantly higher volatility, suggesting that investors are paying a premium for post-merge ‘sell news’ option protection.
With the #Ethereum Merge scheduled for mid September, derivatives traders have bet big on a market rally using Call options
However, futures markets and October Put demand demand suggests an expectation to sell the news.
Watch our latest video analysis👇https://t.co/JPDdOGZV1G
— glassnode (@glassnode) August 9, 2022
Although it has rallied since the initial announcement, Ethereum’s price action is still uncertain after the merge. Notably, Ethereum co-founder Vitalik Buterin confirmed that the date has been revised to September 15. In this line, Twitter user Rager predicts that due to the revision of the merge, Ethereum will record some pullback before climbing.
ETH derivatives data shows rally cooling off
Additionally, the anticipation of the software update has caused Ethereum to reach a high value of $6.6 billion in exchange for options open interest, surpassing Bitcoin (BTC) for the first time. Data from Glassnode shows that for the first time in history, the ETH option rate has exceeded the BTC rate. As Glassnode explains:
For the first time in history, the $6.6 billion ETH options Open Interest has surpassed the $4.8 billion BTC open interest. This appears to be a result of investors taking large positions with the call options the merger planned for mid-September.
Ethereum merge and possible side effects for altcoin market
On the other hand, Aave’s head of developer relations, Marc Zeller, warns of some potential effects of the merge that have been overlooked. According to Zeller:
When the merge happens, there will be front-running bots that can instantly find every PoW block, down to the empty liquidity pools on the Ethereum POW by Uniswap and others. The goal is to sell as many tokens as possible – to get as many EthPOWs as the only assets on the Ethereum PoW chain that can have any kind of value.
Meanwhile, it’s worth noting that not all Ethereum community members support the upgrade. There is speculation that disgruntled developers will fork Ethereum to protect the PoW network. Buterin urges miners to switch to Ethereum Classic (ETC) instead. He also expressed confidence that a fork would not significantly affect Ethereum. cryptocoin.comWe have quoted Buterin’s statements in this article.
