3 strategies investors might use to trade the upcoming Ethereum Merge

The Ethereum network’s long-awaited transition from proof-of-work to proof-of-stake is set to occur from Sept 15 to 16 and for the last year, traders and analysts have been discussing various outcomes for the upgrade and possible trading strategies.

Let’s take a look at three options investors and traders have.

Hodl ETH to earn the expected “hardfork” token

The first strategy is relatively simple. Traders can simply buy Ether (ETH) in the spot market and hold it in their exchange wallet, or whatever platform/wallet will support forked tokens, and wait for the expected PoW token.

Way back in 2017, when Bitcoin was forked to Bitcoin Cash, BTC holders received an equal amount of BCH, which at one point traded for $1,650 per token. At the height of the 2021 bull market, BCH rallied as high as $800.

If PoW tokens from those entities that choose to ignore the Merge happens, then finding exchanges that support the hard forks would be the place to sell them. Don’t forget to pay your taxes if your country obligates you to do so.

Once people understand that speed to market is irrelevant in the face of centralization, censorship and custodians, it will be too late.

Protocol level censorship is coming. More custodians are coming.

How much power do you think the US has over a publicly traded company?

ETH pic.twitter.com/SywlcnZ0tC

— $nadjritzcalod (@nadjritzcalod) August 16, 2022

There’s also a possibility that ETH PoW tokens won’t immediately pump and dump. Many analysts are sounding off about the risk of centralization to a PoS Ethereum network, and while it may sound far-fetched, a miner-led PoW ETH fork could gain ground, assuming projects and developers are willing to build DApps on the blockchain.

Long ETH, short futures

Let’s say you’re a tad bit skeptical about whether Ethereum will successfully pull off the Merge. A lot of people are. And after this hellacious year where Bitcoin (BTC) lost all of its yearly gains, Wonderland Money collapsed and Terra (LUNA) —now Terra Classic (LUNC), Celsius and Three Arrows Capital rugged everyone , it’s perfectly natural to be nervous about a fundamental change in the market’s second largest asset.

Hedging is the option for investors who feel 50/50 about the Merge. Basically, one would be long Ether, which many holders naturally are and have been for years, or at least from the recent $880 “bottom.”

While long Ether, holding a short position in futures or options contracts allows one to protect against losses if ETH corrects sharply and hopefully obtain the PoW hard fork tokens, which should further cancel out losses on the spot position.

The hope of making up some of those “losses” from gaining the unconfirmed PoW tokens could help skittish Merge traders sleep better at night and perhaps wrap things up in profit.