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Short Ether Ahead of Software Upgrade is a Crowded Trade

  • Trading data shows that more traders are shorting Ether in the derivatives market, as the underlying blockchain is scheduled to go through its biggest technical upgrade this week.
  • It could be that traders are hedging as the price of Ether has mostly increased while funding rates have gone negative with “The Merge” happening this week.

Buy the rumor sell the news – at least that seems to be the mantra as cryptocurrency traders are approaching the long-awaited Ethereum software upgrade set to move Ethereum’s current system of using miners to a more energy-efficient one using staked coins, otherwise known as “The Merge.”

Trading data shows that more traders are shorting Ether in the derivatives market, as the underlying blockchain is scheduled to go through its biggest technical upgrade this week, possibly to hedge against downside risk and also in anticipation of a sharp correction.

The native token of Ethereum has been underperforming Bitcoin since Friday, despite having led Bitcoin for weeks up to now, which suggests that many traders are taking some money off the table.

Ether’s underperformance stems from traders rotating money out of Ether and into Bitcoin, over growing concern that the Ethereum software upgrade will not be as smooth as priced in.

According to crypto data firm Kaiko, the funding rates of Bitcoin and Ether perpetual futures contracts diverged sharply over the past weekend ant the funding rate for Ether dipped to its most negative since July 2021.

It could be that traders are hedging as the price of Ether has mostly increased while funding rates have gone negative with “The Merge” happening this week.

A lot of investors are hedging their long spot positions on Ether and shorting Ether on the derivatives market is one way to hedge their risk.

Some traders expect that “The Merge” will become a “sell-the-news” event for the market.

Ether has fallen about 50% this year alone, but is up nearly 70% in as many weeks.

As the prospect of “The Merge” draws closer, some traders may be looking to lock-in some of the gains over the past several weeks.

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SuperCryptoNews is a global leading blockchain and crypto news provider, covering daily news on the latest tech and trading developments in crypto. We bring you expansive crypto news coverage especially in Asia, with a focus on Singapore, Thailand and Southeast Asia.

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