Ethereum upgrade “Merge”

It is the Ethereum upgrade “Merge” that has been leading the rise in virtual currency since about two months ago. 바이빗 Today, let’s look at how to invest before and after the Ethereum upgrade, which is expected to take place around September 15. As I said in the previous post, Currently, Ethereum is a proof of work (PoW) method. The main purpose of the upgrade, Merge, is to switch to proof of equity (PoS).

When you upgrade to a proof of equity method, you no longer need a graphics card to participate in the node.

So miners who own expensive graphics cards are expected to respond by moving to other coins that can be mined with existing mining machines, such as Ethereum Classic, or by modifying the Ethereum code to create and separate Ethereum networks that can be mined with mining machines (hard fork).

Even after the current Ethereum 2.0 upgrade, the proof-of-work method will be hard forked to Ethereum at least 5%.

Positioning strategy before and after Ethereum upgrade

Experts say it is a smarter investment to buy Ethereum in kind (long position) before the upgrade, and Ethereum options (gifts), which expire at the end of September or December, are short positions.

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According to GlassNode data, Ethereum is packed with outstanding agreements at prices higher than the current price. This means that up to $5000 is packed with option long position outstanding agreements.

However, after the Ethereum upgrade, the put option is focused on outstanding arrangements in anticipation of a drop in prices. In other words, the option market is widely expected to see prices fall after the Ethereum update.

Meanwhile, the Fed’s interest rate decision will also be announced around September 15, when the Ethereum upgrade takes place. If higher-than-expected interest rates shock the market, the drop in Ethereum prices could be greater after the upgrade.

Ethereum Staking Strategy Interest Rates and Short Position Hetching Strategies

Staking is simply a coin deposit. If you deposit money in a bank, you’ll get interest in money. If you staked the coin, you will receive interest as a coin.

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For example, a coin called BETH in Binance is an Ethereum that has been switched when the Ethereum is staked. If you have BETH, you will be paid Ethereum like interest. This is the equity method. If you make a deposit, Ethereum is mined.

The current annual interest rate is between 4 and 5%. After the Ethereum upgrade is complete, BETH coins can be exchanged 1:1 with Ethereum (ETH).

What’s important in staking is ‘interest rate’ and ‘Hedge strategy’.

If you steak coins, you can receive interest as coins, but if the coin price falls in the meantime, it may be a loss in actual value. This is why we do ‘short position hedging’ to spread the risk.

For example, if you steak Ethereum on the Upbit Exchange, at the same time, the MEXC Exchange takes a 1x short position as a gift. Then, whether the price of Ethereum Coin itself goes up or down, my investment principal is the same absolute value.

Of course, there are additional costs such as spot transaction fees and forward transaction fees. There is also a separate fee for the staking process. If you think about all these fees, the interest when you steak Ethereum should be at least 6%.

It also has to compete with interest rates on U.S. government bonds.

If the U.S. benchmark interest rate rises, the popularity of government bonds issued by the U.S. government will decrease, and the market price of government bonds traded in the market will decrease. On the contrary, the interest rate on government bonds that you can receive at maturity will go up.

When staking coins, the interest rate minus various fees must also compete with bank interest rates or government bond rates. If the staking fee reaches this level after the Ethereum upgrade is completed, the Ethereum price will also stabilize.

Investment Strategy for ETHS and ETH Price Profit

If you have ETHS on an exchange that has ETHS listed, you can exchange ETHS for ETH (Etherium after the Ethereum upgrade. If the ETHS price is lower than ETH, this difference can be realized.

Take the MEXC Exchange Exchange, which has already listed both ETHS and ETHW.

ETHS price is 1912 dollars

ETHS at this time is about 1912 dollars.

ETH price in exchange for ETHS is $1988

ETH, which can be exchanged with ETHS after the upgrade, is currently priced at $1988. So the difference between both coins is $60 to $70.

Of course, if the price of Ethereum at the time of upgrade and exchange is much lower than the price of Ethereum at the time of snapshotting before upgrade, 70 dollars of profit could be a loss.

ETHW and hedging strategies that you can get for free after upgrading if you have Ethereum

On the other hand, if you have Ethereum in kind, you can get ETHW (Durium in Proof of Work) for free after the upgrade. It’s because of the hard fork. I talked about this in the previous post.

The current price of ETHW that you can get for free if you have Ethereum

Because of this, Ethereum prices have continued to rise recently.

It is worth considering the hedging strategy mentioned above to preserve the value of Ethereum itself because if Ethereum prices fall significantly while continuing to buy Ethereum for free.

This strategy is purely to take the value of ETHW coins.