By Frances Yue
Hello! Welcome back to Distributed Ledger, our weekly crypto newsletter that reaches your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch, and I’ll walk you through the latest in the digital asset market.
Crypto in a snap
Bitcoin /zigman2/quotes/31322028/realtime BTCUSD +1.24% gained 6.9% over the past seven days, and was trading at around $24,139 on Thursday, according to CoinDesk data. Ether /zigman2/quotes/108573964/realtime ETHUSD +1.16% advanced 16.9% over the seven-day stretch to around $1,879. Meme token Dogecoin /zigman2/quotes/226077044/realtime DOGEUSD +0.31% went up 7.8% while another dog-themed token, Shiba Inu /zigman2/quotes/231473891/realtime SHIBUSD +1.36% , added 5.4% from seven days ago.
|Biggest Gainers||Price||%7-day return|
|Source: CoinGecko as of Aug. 11|
|Biggest Decliners||Price||%7-day return|
|Source: CoinGecko as of Aug. 11|
‘Merge’ is coming
As Ethereum’s highly-anticipated “Merge” approaches, ether’s spot and derivatives markets have seen increased activities.
The “Merge” is an upgrade that will transition Ethereum from proof-of-work to proof-of-stake, a consensus mechanism that is much more energy efficient, and will pave the way for the blockchain to be cheaper and more productive. Tim Beiko, who organizes Ethereum core developer calls, in July projected the “Merge” to be launched in the week of September 19.
As the date comes nearer, ether has been gaining market share, while the market share of bitcoin and stablecoins have been declining, according to a Tuesday note by Arcane Research.
Meanwhile, in late July, the open interests of ether options, which measures the outstanding contracts, surpassed that of bitcoin for the first time in history. The open interests of ether options recently stand near its all-time high, while those of bitcoin options are still about 35% lower from its peak, according to data from Glassnode.
Eliézer Ndinga, director of research at 21 Shares, said he expects more volatility in ether price with the “Merge” approaching. “It could be on the upside or the downside,” Ndinga said. “It would depend, again, on how successful the merger would happen,” according to Ndinga.
“In the options market, some people have expiry dates around the end of September, which is obviously indicative of speculation,” Ndinga noted.
Some traders appear to be positioning themselves with the expectation for ether price to rise into the merge and fall afterwards, according to analysts at Glassnode.
“Both futures and options markets are in backwardation after September, suggesting traders are expecting the Merge to be a ‘buy the rumor, sell the news’ style event, and have positioned accordingly,” the analysts wrote in a note Tuesday.
Ether’s three-month futures contracts have been trading lower than its spot price. “This means that futures traders are pricing ETH at a discount post Merge,” according to the Glassnode analysts.
The backwardation may also be a result from some trader’s strategy of going long ether in the spot market while shorting ether futures, in preparation for the possibility of a hard fork, analysts at Arcane Research noted.
In late July, Ethereum miner Chandler Guo proposed to hard fork the Ethereum blockchain, splitting the chain, with one that continues to be based on the proof-of-work consensus mechanism. After Ethereum moves to the proof-of-stake mode, miners will become obsolete.