For the last month, crypto markets have been pounded by speculation over the possible impact of Ethereum’s (ETH) upcoming Merge – a crucial milestone for the second-largest blockchain. A salient question is how the switch to a proof-of-stake system, considered faster and more energy-efficient than the present proof-of-work protocol, will influence prices for ether and digital assets.
And with the merge now nearing, anticipated next month, the narrative of the market keeps twisting.
As per a weekly report from Kaiko, ether’s sharp price plunge on Friday put forward a sharp downturn in open interest on derivatives – contracts that traders used to build leveraged bets on the crypto’s upcoming price. Several traders had their derivatives trades liquidated, or swiped out due to calls of margin, as per Kaiko.
However, the data provider discovered that money rushed back into the ETH futures market on Monday.
“As the price dipped below $1,600, we observed a significant spike in open interest,” Kaiko mentioned.
There’s also been a lot of movement in the rates of funding on ether perpetual contracts, which are like futures contracts on commodities but with no dates of expiration. The funding rates were retrieved to close-neutral levels after falling alongside the price of the token.
“When combined with the spike in open interest we observed this morning, it seems these new positions in ETH futures are biased long and investors are bullish at these price levels,” Kaiko noted.
Individually, ether’s weekly share combined trading volume of ether and bitcoin touched 57%, the top mark since 2018. This trading activity outdid Ethereum’s past hike of 55% during the crypto sell-off in May 2021.
“The main driver of ETH trading activity in July has been increased optimism around the Merge and an improvement of global risk sentiment. However, last week’s sell-off across markets confirms that ETH remains a higher beta play,” Kaiko wrote.
There’s sufficient speculation that many ETH miners can try to keep backing a proof-of-work, which the blockchain presently uses, like Bitcoin’s. Ethereum Classic (ETC) and ETHPOW – based on a newly built, theoretical fork that can happen– have been acknowledged as potential options as the Merge nears.
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