ETH Futures Are Telling A Story
Mind The Curve
Futures curves are good enough at telling stories that you often don’t need to read the news. It’s interesting to see what the Ether futures curve might be telling us.
The latest estimates call for the execution of the magical #Ethereum merge to occur on the week of September 19th. This long-awaited event has helped boost #ETH by 65% over the past month. Impressive, but remember that the price is rallying from a horrible low and is still down by 42% over the last year.
The merge brings about Ethereum’s new proof-of-stake consensus layer and is intended to provide more scalability, security and sustainability. The merge will also take a huge chunk out of Ethereum’s carbon footprint as it will create a massive drop in Ethereum’s energy requirement.
Sounds great. Sounds ideal, doesn’t it? Builders love building on Ethereum and now they may do so with a cleaner conscience as their green initiatives stay in better standing.
If we take a look at what the market is saying, we may have some trouble ahead as Ether futures at CME Group are trading in backwardation. Aug22 futures are priced $24 higher than Oct22 futures.
Backwardation occurs when near-dated contracts are priced higher than later-dated contracts. In theory, this shouldn’t occur. While cost-of-carry is iffy in the crypto space, you still have the time value of money and other components that should keep the later-data contracts priced above the near-dated contracts. Interest rates, speculation, supply/demand concerns and speculation are some of the things that could place the futures curve out of whack
There are clearly some doubters out there in cryptoville. Doubters of the merge magic. Magic’s been known to go wrong and the merge doesn’t answer all of ETH’s questions. There’s still the gas issue and other concerns.
So what if the merge fails? It’ll likely get ugly to the downside in there real quick. 💥💥 But what if the merge goes smoothly? There seem to be some awfully deep discounts in the deferred contracts. We could easily see some fireworks the other way. 🚀🚀
I have no idea what’s going to happen with this big change and am in no way advocating a trade…just putting out some thoughts. Do your own research and share how the markets may react to #TheMerge
#crypto #cryptocurrencies #trading #markets #futures #wallstreet
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