- Ethereum price is showing signs of weakness and may return to the $1,730 support level.
- Any dips to $1,540 are bullish retracements and are intended to be bought especially with a merger update fast approaching.
- A daily candlestick close that turns the $1,270 support level into a resistance barrier invalidates this bullish outlook.
Ethereum price has risen by 102% in the last 33 days and one can attribute this to the upcoming software upgrade – Merger. This update switches the ETH blockchain from energy-intensive Proof-of-Work (PoW) to environmentally friendly Proof-of-Stake (PoS).
As a result of the speculation, investors have been bombarded with Ethereum-centric coins such as Ethereum Classic (ETC), Optimism (OP), Ethereum Name Service (ENS), Polygon (MATIC) and others.
While this uptrend is extremely profitable, there are many questions that, at least from a speculator’s perspective, remain unanswered. Some of these questions are:
- What will happen to the price of Ethereum after the merger?
- Should I hold Ethereum Classic and other ETH-centric altcoins after the merger?
Let’s try to answer these questions.
Do I need to hold ETH after the merge?
Before we get into what will happen to the Ethereum price after the merger update, let’s understand what is happening right now.
The most popular ETH trade is long spot and short long-dated futures. This is a delta-neutral trade, where the trader builds their position in such a way that the total delta is neutral regardless of direction.
In the case of ETH, investors are trying to extract value, i.e., ETH PoW airdrop. Furthermore, Glassnode’s report adds credence to this view and the positions of market participants show that they are preparing for a “sell-news” event.
With roughly a month to go until the forecasted merger upgrade, investors should consider booking profits and at least prepare for the worst from their futures positions, be it ETH or other ETH-centric altcoins.
Arthur Hayes, founder and former CEO of BitMEX, States After the merger, investors are likely to close their hedges – their short positions – in long-dated ETH futures, leading to large-scale buy-backs, accelerating the upward movement of the spot ETH price.
Hayes further asks what happens if the upgrade goes smoothly, but hedgers close out their short positions and speculators who believe the triple-halving narrative enter long positions.
Now the pressure is on the buy side, and market makers should short futures and go long. A reversal of their positioning pre-merger. This is a positive feedback loop, leading to higher spot prices if the merger goes smoothly on September 15.
In conclusion, the spot price of Ethereum will face a significant rise, and only if the merger goes off without a hitch. On the other hand, if there is a hiccup, the controversial ETH PoW hardfork is likely to gain more value.
After the merger, Ethereum’s beacon chain will split into ETH1 or ETH PW and ETH2 or ETH PoS. The previous fork, powered by miners, will be a minority blockchain with a 5% to 95% value split compared to ETH2.
Will ETC, OP, MATIC and ETH1 dump?
The above-mentioned scenario answers the second question, i.e., more miners support ETH1 as opposed to Ethereum Classic (ETC) or other ETH-related coins as mentioned above. Confirmation of this can be seen in the hash rate drop across the board for ETC and other PoW storage coins such as Filecoin (FIL), Arweave (AR). Hence, these altcoins have a high probability of canceling the gains made in the past period. A few weeks.
As for the ETH PoW airdrop, investors are more likely to seize 5% of the value in ETH1 and sell tokens at the first sign of weakness. However, as history has it, this chain is likely to survive and other PoW coin forks like Ethereum Classic (ETC), Bitcoin Cash (BCH) and Bitcoin SV (BSV) to name a few.
How High Can the Ethereum Price Go?
Ethereum price shows a pause in its rally at the $2,020 level after an 18% climb since August 10. The start of a recovery could push ETH down to the $1,730 support level. In total, this move involves a 9% withdrawal.
With roughly 30 days left until the merger, investors can expect the spot Ethereum price to rise further. Therefore, a move to $1,730 is a buy-dip recovery. In some cases, ETH may crash to the intermediate support level at $1,600.
Regardless of where Ethereum price stabilizes, the next level to watch is $2,324.
ETH/USDT 1-Day Chart
On the other hand, a breakdown of the $1,600 or $1,540 support levels indicates that Ethereum price is on a steep correction path. A daily candlestick close that turns the $1,270 support level into a resistance barrier invalidates this bullish outlook.
In such a case, ETH is likely to go to the $1,080 support level, where buyers can step in and buy the smart contract token at a discount.