Despite both Bitcoin and Ethereum seeing a rise in price in recent days, sentiment around the two coins is stark.
Last weekend, Bitcoin and Ether perpetual futures funding rates dropped considerably, but while Bitcoin funding rates turned positive, Ether funding rates dropped to the most negative level seen since July last year.
ETH price bulls set to crush shorts
The difference in sentiment between the two tokens has come amid news of the Ethereum Merge, which is expected to happen this week. The Ether funding rates during the week have been on the negative side for more than a month now after investors hedged their risk exposure by going for short perpetual futures.
A report by Kaiko found that Ethereum investors have been turning towards the futures market as they anticipate The Merge – the Ether perpetual futures is now trading at more than seven times the volumes of spot markets, a four-times increase from last November.
Every time the funding has dropped to the negative side during the past month, prices have increased, and the funding rates moved towards the positive territory. With the Merge being less than 48 hours away, it is expected that the short futures positions will be closed out, and funding will go towards the positive side.
During the past week, Ether has gained by 7%, and the rest of the cryptocurrency market has also pumped, which has increased the market volatility and is now at yearly highs. The derivatives market plays a crucial role, with the funding rates dropping sharply negative for Ether.
On the other hand, there is also a significant discount on the three largest staked Ether tokens, stETH, cbETH, and bETH. The three stablecoins do not have to maintain a 1:1 peg to Ether because they will be redeemed after the Merge for 1:1. The discount shows the risks carried by investors.
cbETH carries the highest discount, which is heavily discounted following the centralization risk following the regulatory positioning of the Coinbase exchange. However, this discount is improving, but the situation is creating an ideal investment opportunity.
Ethereum Classic gains as the Merge nears
The highly anticipated Merge to transition Ethereum from a Proof-of-Work (Pow) to a Proof-of-Stake (PoS) network will replace the energy-intensive mining process. These miners will be replaced by validators which will not be tasked with adding new blocks to the chain.
The Merge is now pushing Ethereum miners to search for alternatives, such as Ethereum Classic, which is still running on a PoW algorithm. Ethereum Classic was launched in 2016 and has emerged as one of the top blockchain networks since July. The same is prompting more people to buy Ethereum Classic.
The ETC-USDT perpetual futures open interest on the Binance and OKX exchange increased to a new all-time high of $350 million on September 6 following the launch of the Bellatrix upgrade, which has increased six times since July.
The funding rates for ETC have also turned positive, showing a high demand for leveraged long positions. On the other hand, the ETH funding rates are on the negative side, showing a combination of a bearish trend and hedging.
The high capital inflows into ETC perpetual futures contracts and the hash rate reaching a new ATH. This is a sign that the computational power of PoW miners has been transferred into ETC. The trend is expected to continue in the days leading up to the Merge.
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