The Merge positioned Ethereum futures and options in a manner that showed traders were selling the news. Before the Merge, Ether was trading at a weekly high of above $1700 before dropping to around $1600 after Merge. Ether has since collapsed to lows of $1300.
Ethereum Options data shows traders are bullish
According to a report by Glassnode, the Call option Open Interest has dropped by $600 million after the Merge, depicting a 10% decline. The highest number of ETH speculation happened in the options market before the Merge.
The Glassnode on-chain report added that there was $5.2 billion in outstanding call option position value, notably higher than in 2021. The put options market also recorded a larger dip of 19%, but it remained small with $294 million in net position value closed.
Ether’s price has corrected by 22% since the Merge. However, as investors speculate on bullish gains, the ETH markets seem to be heavily utilized and levered up.
Ether has been losing most of the gains made since mid-July. The sell-off has been caused by multiple factors, including traders taking profits following the recent out-performance of Ether compared to the broader market. ETH is among the new assets that have performed well in recent months despite the negative macro outlook. Therefore, it is expected that traders will take profits.
Despite the Merge being completed successfully, it still seems like most risk hedging positions are yet to be closed. Futures Open Interest is at an all-time high after an 80% gain since early May. Over the past week, there was also a rise in futures leverage. On the other hand, the funding rates have reverted to neutral, suggesting that short-term speculation is fading.
The Ethereum Network after the Merge
The transition of Ethereum from proof-of-work to proof-of-stake saw the mining difficulty drop to zero immediately. The drop happened instantly, with no periods of adjustments. The revenues for PoW miners have also vanished, leaving these miners moving to other PoW networks like Ethereum Classic.
The Ethereum Merge was a success and has been hailed as one of the most significant events in the history of web 3.0 & crypto. The event was finalized after many years of research and dedication. Ethereum’s transition to PoS has now introduced new players to the network.
Ethereum miners will be replaced by a pool of validators that will be block producers. The network currently has a total of 429.6K Active Validators, and there are currently more than 14.586 million Ether tokens staked. This represents 12.2% of the total Ether supply.
However, the issue of validators is already creating concerns over Ethereum’s increased centralization. After the Merge, the co-founder of Gnosis said that out of the recent 1000 blocks, 420 blocks were produced by Lido and Coinbase. He also added that only seven players owned two-thirds of the staked ETH on the Ethereum PoS network.
However, the Merge is just the start of the updates expected to come to the Ethereum Network. In 2023, the Shanghai update will go live, allowing the withdrawal of staked Ether tokens. Other upgrades will also follow, seeking to lower the gas fees and boost transaction speeds.
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This article was written for Business 2 Community by Ali Raza.
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