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Division emerges between retailers and pros over how to play Ether upgrade

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Division emerges between retailers and pros over how to play Ether upgrade


The crypto world has been abuzz about the upcoming Ethereum software update. Yet there is a divide as to how to position for the so-called merger: retail investors have sold the underlying token, while institutions continue to buy.

The Genesis trading desk saw “new bullish views on ETH expressed” with investors buying calls and selling puts. Enigma analysts say traders are likely expecting a retracement after Ether’s big rally since June. The B2C2 trading company sees a lot of Ether buying. And yet, BlockFi customers have been selling for a few days.

“Retail investors are getting a little nervous about another risky period for markets,” given the Federal Reserve’s hawkish stance, said Matt Maley, chief market strategist at Miller Tabak & Co. .table. However, more sophisticated institutional investors are taking advantage of the decline to add Ether.


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Both cryptos have been volatile lately

Ethereum’s upgrade is long overdue and news about it has been well received by investors, who since early July have driven the price of its token up by around 50%. The blockchain is designed to facilitate the transition from the current system of using miners to a more energy-efficient system using staked coins. The move to this so-called proof-of-stake system from proof-of-work should happen soon after being abandoned for several years.

Ethereum recently completed its final pre-upgrade test, and the developers said the main event should take place next month.

Speculators had been positioning themselves for the token to continue its run, although many are also betting that once the upgrade takes effect, Ether could plunge as part of a “sell the news” type event. And the token has already returned some of its recent gains, dropping around 8% in the seven days to Friday.

“The short-term rally on BTC and ETH looked weak” and “we were likely heading for an inflection point,” the strategists at Securitize Capital wrote. “That appears to have been the case.”

Stocks and cryptocurrencies have been choppy lately after a scorching rally over the summer, wavering as the Fed vows to be aggressive with its interest rate hikes. Traders are likely expecting Ether and Bitcoin to retrace some of its gains, “which, if true, will make $ETHUSD the target of the bears,” Eliott Attlan of Enigma Research wrote in a note. .

But BlockFi’s retail client has already offloaded. They were net sellers of Ether the weekend before the Fed meeting in Jackson Hole on Friday.

The typical trade recently has been to buy spot ether and sell futures against it, according to a note from Cumberland on the Merge. Such an exchange allows Ether holders to receive a token that will be derived from the network known as ETH PoW without the risk of a price drop. Still, thanks to the uncertainties surrounding the upgrade, Ether holders sold September and December futures.


At B2C2, there were more purchases than sales of Ether. The buy/sell ratio was 55% on the long side, with particular interest coming from funds, which is the largest cohort by volume and where the company recently saw 62% buyers. Normally that would be closer to 50% in any given week, “so that’s quite a change,” said Edmond Goh, head of trading at B2C2. “All eyes continue to follow the merger.”

Meanwhile, questions around the Ether chain split are starting to accelerate, said Stéphane Ouellette, managing director of FRNT Financial Inc. His clients are looking to assess the value of a potential new emerging proof-of-work chain. after the upgrade. “There are a growing number of arb strategies emerging around the complex and clients are also trying to decide if there are any outright value plays in the PoS and PoW chains around the merger event,” he said. he declares.

Still, although some are selling Ether right now, sentiment has yet to deteriorate and the merger is still viewed positively. “That may change however, you start to see a much more philosophical debate about the value of PoW systems versus PoS systems as the date approaches,” he added.

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