Cryptocurrency market players are now eyeing the Ethereum Merge update; An event that they have been waiting for for a long time. However, there is a lot of speculation about how Marj is going to play out among cryptocurrency traders, some of which can help us predict the price of Ethereum.
To Report CoinDesk experts predict that the Marj update will reduce the energy consumption of the Ethereum network by 99.95%. This will be useful for maintaining the stability and security of the network. According to the latest estimates, the Ethereum consensus mechanism change will take place early Thursday.
The blockchain analysis platform Nansen and the data company Kaiko have reviewed the points regarding the update of the Ethereum platform in reports. In the following, we will examine 4 of the most important points that these companies have taken under the microscope.
Ethereum capitalization rate
The funding rate for traders is similar to the interest rate; Except that this rate is the fee they pay for the leverage they use when opening trading positions. In general, a negative funding rate means that there is more demand to trade lower in price.
Keiko Company has reviewed the financing rates in the digital currency market as the time of Marj approaches.
According to the company’s research, while Bitcoin’s funding rate has recently turned positive, Ethereum’s funding rate has reached its lowest level since July 2021 (July 1400).
As Marj is likely to cause a short squeeze in the market, investors are increasingly moving from spot markets to futures markets to re-adjust their risk before the Ethereum network updates.
According to Kaikou, if Ethereum Marj is successful, we can expect these short positions to be closed and the funding rate to move into positive territory. If this happens, it can be a positive factor for the growth of Ethereum price after Marj.
Both mentioned companies have reviewed the status of staked Ethereum, as this locks up some of the investors’ assets for a long period of time. Staked Ethereum (stETH) is a Lido protocol token that allows traders to withdraw Ether even when the cryptocurrency is locked for staking.
In theory, staked Ethereum tokens should trade at the same price as the Ethereum tokens (which they are supposed to replace). However, these tokens are trading at a discount ahead of the merger.
Nansen’s research shows that 31% of staked Ethereum tokens are staked in the Lido protocol, followed by Binance, Kraken, and Coinbase, which together hold about 30% of the tokens.
These tokens can be redeemed at a one-to-one ratio at any time after the event. However, Kaiko has seen a significant discount in 3 Ethereum staking tokens; That is, Staked token (stETH) from Lido platform, Coinbase Rapid Ethereum (cbETH) from Coinbase exchange and Beacon Ethereum (bETH) from Binance exchange. This is a reflection of the different risks that investors feel.
In his report, Nansen also pointed out the risks after the correct implementation of the integration update and adoption of the Ethereum Proof of Stake chain.
However, according to Kaikou, on September 11th (20th of September), we have seen a decrease in the discount in stETH and beTH token transactions. Investors are likely to have been satisfied enough with the discount to invest in both tokens, as they have profited from both the Ethereum staking and the price discount after redeeming the token with a one-to-one value.
Ethereum Classic Derivative Markets
According to Keiko’s report, Ethereum Classic has become very attractive to investors since July; Because this blockchain, similar to Ethereum, is expected to remain a proof-of-work network after the merger.
In fact, at the same time as the processing resources of Ethereum miners are transferred to this proof-of-work network, the inflow of capital into Perpetual futures contracts of Ethereum Classic should increase greatly.
This influx of capital is likely to continue as the second largest Ethereum mining pool, F2Pool, announced last week that it will stop mining the cryptocurrency in September and shift its resources to Ethereum Classic.
According to Nansen’s report, large Ethereum investors have been steadily investing in their tokens since the beginning of 2022 regardless of market volatility.
However, researchers at Nansen have said that smart money (funds managed by institutional investors) have started to pick up in the Ethereum market after hitting a low in mid-June. In other words, institutional investors expect the price to have a positive trend due to the merger update.