Ethereum Price Forecast: Trading Strategies for ETH After the Merge

Trading Made Easy 2023-09-13 10:14:07

As Ethereum 2.0 undergoes its inaugural post-Merge transformation with the Ethereum Shanghai upgrade, it marks a significant milestone for this prominent smart contract network. This upgrade is poised to augment the world's second-largest cryptocurrency project by fulfilling previous liquidity commitments and introducing general enhancements aimed at simplifying interactions with smart contracts.


Are you eager to delve deeper into the implications of the Ethereum Shanghai network upgrade on Ethereum's price following the Ethereum Merge? In this comprehensive article, we will explore the reasons for the heightened anticipation surrounding this upgrade and elucidate potential strategies to consider once the network upgrade is completed.

Understanding the Ethereum Merge

The Ethereum Merge represents a pivotal upgrade where the Ethereum network transitions from proof of work (PoW) to proof of stake (PoS) for block and transaction validation.


Before the Merge, the Beacon Chain operated alongside the Ethereum chain, utilizing a PoS consensus layer. With the Merge, the PoW Ethereum chain merges with the Beacon Chain, making the Beacon Chain the sole producer of Ethereum blocks, employing its PoS consensus model.


Why the Ethereum Merge Stirs Excitement

The Merge, which took place on September 15, 2022, after six years of anticipation, propelled the Ethereum blockchain into a faster, more scalable, and energy-efficient era. This highly awaited event ignited fervor among investors, bolstering enthusiasm and boosting the price of ETH, which had dipped to its lows in June 2022.


Post-Merge, the blockchain's energy efficiency significantly improved, as the PoS mechanism consumes roughly 99% less energy compared to the power-intensive PoW system. Furthermore, The Merge is expected to reduce transaction processing times, lower fees, and pave the way for scalability, potentially enabling up to 100,000 transactions per second (TPS) through sharding.


The transition also altered the reward distribution, diverting rewards from miners to stakers. This shift democratizes participation in the Ethereum community and network. Becoming a validator now requires staking 32 ETH and some straightforward software, thus facilitating greater decentralization and security. This transformation positions Ethereum for future scalability and growth.


The Ethereum supply could become deflationary if more ETH is burned during transactions than generated through inflation. This hinges on on-chain activities and user incentives to choose Ethereum over other Layer 1 blockchains. However, the Ethereum Foundation has indicated that the consensus mechanism change will have limited impact on transaction fees.

Post-Merge Ethereum Upgrades

Following the Merge, Ethereum has outlined a series of significant network upgrades, including Surge, Verge, Purge, and Splurge.


The initial upgrade, Surge, introduces sharding to enhance Ethereum's overall scalability. It encompasses the Ethereum Shanghai upgrade, a critical primer preparing Ethereum for what lies ahead post-Merge. This upgrade, slated for execution by March 2023, empowers validators with the ability to withdraw their staked ETH from the Beacon Chain.


Verge will enhance the Merkle tree proofs into Verkle trees, reducing proof sizes, thus enabling more users to become validators due to decreased data storage requirements.


Purge is set to eliminate the use of nodes for storing Ethereum transaction history, freeing up valuable hard drive space for validators.


The final upgrade, Splurge, aims to ensure the seamless implementation of the previous four upgrades.

Post Ethereum Merge Price Prediction: Exploring Potential Outcomes

The Ethereum Merge generated significant speculation as traders pondered how ETH prices would respond to this highly anticipated upgrade. Although ETH experienced a substantial drop on September 15, 2022, immediately after the Merge, its price has since recovered, currently resting at $1,557 as of January 17, 2023. With the Ethereum Shanghai upgrade on the horizon, speculation abounds regarding ETH's reaction to this network enhancement.


In the broader context, the Shanghai upgrade promises to enhance Ethereum's appeal as the preferred smart contract platform, resolving persistent issues like staked ETH withdrawals and gas fee inefficiencies. However, in the short term, ETH prices could exhibit volatility due to the inherent uncertainties.


Let's explore three potential outcomes and corresponding trading strategies:


Bullish Post-Merge Ethereum Price Prediction

In the wake of the Ethereum Merge, four subsequent upgrades are planned to enhance Ethereum's stability and scalability. According to Ethereum co-founder Vitalik Buterin's remarks during the Ethereum Community Conference, Surge will significantly boost Ethereum's transactions per second (TPS) to potentially reach 100,000 TPS. Achieving this milestone involves integrating rollups through sharding, necessitating minimal delays. The Ethereum Shanghai upgrade plays a pivotal role in this endeavor.


A seamless Ethereum Shanghai network upgrade would undoubtedly be bullish for ETH's price. Positive progress on Ethereum's roadmap could attract more investors, while the prospect of easy ETH withdrawals might encourage users to stake their ETH, enhancing network security and making ETH increasingly deflationary.


Optimal ETH Option Strategy: Bull Call Spread

If you hold a bullish outlook and believe that the market is undervaluing ETH after the Shanghai upgrade, consider employing the Bull Call Spread strategy on BingX. This derivatives strategy involves purchasing an at-the-money (ATM) call option with a distant expiration date and simultaneously selling an out-of-the-money (OTM) call option with the same expiration date.


This strategy is favored by traders because it limits potential losses while offering substantial upside if ETH prices trend upward.


How to Execute This ETH Trade:

  1. Purchase an ATM ETH call option with a strike price of $1,500, expiring at the end of March.
  2. Sell an OTM ETH call option expiring at the end of March. Select a strike price between $1,600 to $1,800, falling within the 0.1 to 0.2 delta range.


Max Profit: Difference between the Call Strikes - Net Debit Paid

Breakeven: Long Call Strike Price - Net Premium Paid

Max Loss: Net Debit Paid


Bearish Post-Merge Ethereum Price Prediction

If the bullish scenario seems overly optimistic, there's an alternative bearish perspective. Staked ETH withdrawals could trigger a significant ETH price drop, with approximately 16 million ETH staked since December 2020 awaiting withdrawal. Given that ETH prices have nearly tripled since the initial staking, it's reasonable to expect profit-taking by early ETH investors, potentially resulting in a "buy the rumor, sell the news" market dynamic, similar to post-Merge reactions.


Optimal ETH Option Strategy: Bear Put Spread

If you anticipate a bearish outlook for the Ethereum Shanghai upgrade and expect traders to withdraw their ETH for profit, you can maximize your potential gains by implementing a Bear Put Spread option strategy on BingX.


A Bear Put Spread entails buying a put option and simultaneously selling an out-of-the-money put option with the same expiration date. This strategy allows traders to profit from declining asset values and benefits from both the falling ETH price and time decay of the short option.


How to Execute This ETH Trade:

  1. Purchase an ATM ETH put contract with a strike price of $1,600, expiring at the end of March.
  2. Sell an ETH put contract with a similar expiry, selecting a strike price between $1,300 to $1,500, within the 0.1 to 0.2 delta range.


Max Profit: Difference between the Put Strikes - Net Debit Paid

Breakeven: Long Put Strike Price - Net Premium Paid (Premium Paid - Premium Sold)

Max Loss: Net Debit Paid


Neutral Post-Merge Ethereum Price Prediction

In a scenario where the Ethereum Shanghai upgrade's impact is already priced into the market, price action may remain relatively neutral, neither surging nor plummeting significantly. Investors might choose to hold onto their ETH through the upgrade, believing in its long-term potential.


Moreover, this minor upgrade, compared to the subsequent Surge upgrade, may not trigger substantial price spikes.


Optimal ETH Option Strategy: Cash-and-Carry Arbitrage Trade

If you observe that upgrade-related news has already influenced ETH futures sentiment, Cash-and-Carry Arbitrage trades offer an optimal approach to profit from the price differential between Futures and Spot prices. These trades leverage market neutrality to minimize volatility and secure small but risk-free profits.


Please note that this arbitrage trade will only be viable if the short Futures position exceeds the cost of the long Spot position.


How to Execute This ETH Trade:

  1. Purchase multiple ETH for $1,580 to establish a long Spot position.
  2. Sell an equivalent number of ETH MAR Futures contracts for $1,586.
  3. With each arbitrage trade, you'll profit approximately $6 from each spread, capitalizing on existing sentiment without directional risk exposure.


In summary, the post-Merge Ethereum landscape, combined with the Ethereum Shanghai upgrade, bodes well for long-term investors. By addressing liquidity concerns and refining existing features, Ethereum's prospects as a premier cryptocurrency have never been brighter. Nevertheless, considering the current macroeconomic conditions, questions about Ethereum's future price remain.


Whether you're a long-term investor or a short-term speculator, the Ethereum price predictions post-Merge provide opportunities to invest in ETH and various other cryptocurrencies by registering with BingX, thereby commencing your crypto investment journey today. Explore these strategies thoughtfully to navigate the dynamic Ethereum market effectively.

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