Before the Merge Update on the 15th, Both Ethereum Spot and Futures Trading Volumes Increase
"Ethereum Expected to Overshoot if Merge Succeeds"
[Asia Economy Reporter Myung-hwan Lee] As the leading altcoin Ethereum approaches its 'Merge' update, there is a forecast that the success or failure of the update will influence the overall investment sentiment in the cryptocurrency market.
The Bithumb Economic Research Institute, affiliated with the cryptocurrency exchange Bithumb, analyzed this in its report titled "Ethereum (ETH) Scenario Outlook Based on Merge Results" released on the 14th. The institute also predicted that if the Ethereum Merge succeeds, Ethereum’s price will experience an overshoot.
The institute pointed out that ahead of the Merge, scheduled for the 15th, which refers to the merger of the Ethereum mainnet and the Beacon Chain, high interest from domestic and international investors is reflected in the increased trading volume of Ethereum spot and futures. According to the report, since mid-August, the daily trading volume of Ethereum on domestic exchanges has generally exceeded that of Bitcoin. On overseas futures exchanges, Ethereum futures open interest surged by 73% compared to the June low as of early September, surpassing Bitcoin’s 24% increase. The institute explained that options investors are buying both call and put options in preparation for significant price movements in either direction after the Merge, anticipating increased volatility.
In the overseas Ethereum options market expiring in September, call option positions were concentrated at strike prices between $2,000 and $5,000. This is interpreted as reflecting expectations that Ethereum’s price will rise beyond that range. Meanwhile, a substantial amount of put option open interest was recorded at strike prices between $1,000 and $1,500, indicating demand to hedge against the possibility of Ethereum’s price falling below $1,500 after the Merge.
Regarding Ethereum futures, while open interest is increasing, the funding rate1) is showing a negative (-) value. The funding rate is positive (+) when long positions dominate and negative (-) when short positions dominate, indicating that bearish (short) sentiment toward Ethereum is prevailing. The institute analyzed that this increase in short positions is more of a hedge against holding spot assets rather than a bet on Ethereum’s price decline.
The report predicted that if the Merge is completed smoothly and Ethereum’s price rises, an overshoot could occur. Considering the currently formed negative funding rate on Ethereum futures open interest, a successful Merge could trigger short covering, leading to a sharp price increase. Optimistic sentiment about future updates is expected to spread, with late-coming buying interest and FOMO (Fear of Missing Out) further driving Ethereum’s price upward.
On the other hand, if the Merge encounters setbacks or delays, combined with unfavorable macroeconomic conditions, the overall cryptocurrency market is unlikely to avoid a bearish trend. Especially considering that the U.S. Federal Reserve (Fed) still has significant rate hikes ahead to reach what it deems an appropriate real interest rate, the failure of the Merge could serve as a pretext for price corrections in the crypto asset market.
Im Seon Lee, Head of the Research Center at Bithumb Economic Research Institute, stated, "The success of the Merge will not only restore investment sentiment across the crypto asset market but also be a factor leading to Ethereum’s relative strength compared to Bitcoin. Conversely, if the Merge fails contrary to expectations, it will be difficult to avoid a bearish trend in the cryptocurrency market."
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