16 Aug 2022

ETHBTC climbs towards 2021 highs

Recent Ether strength as the Merge approaches has led ETHBTC to climb towards its 2021 highs.
Source: Tradingview (Coinbase)
The Ethereum mainnet is rapidly approaching its transition from Proof of Work to Proof of Stake (the Merge) after the final testnet Goerli was successfully merged last week. The final Merge of the Ethereum mainnet is now estimated to occur around September 15th. The Merge has been a strong narrative, leading ETH to outperform BTC significantly since the middle of July. Relative to BTC, ETH currently trades near the 2021 highs, currently trading at 0.078, after recovering from lows of 0.053 on June 18th. We noted trading opportunities related to Ether in our previous market update. Since, ETHPOW-related instruments have struggled to gain any meaningful traction. BitMEX’s ETHPOW instrument has seen low volumes and currently trades at $60, 3% of the price of ETH. Meanwhile, Ether futures still trade at a sharp discount to spot, with the quarterly ETH futures contract trading 4-6% below the spot market annualized. In 2021, the ETHBTC price peaked at 0.0886 on December 9th, 2021, 13% higher than today’s level. The current ETHBTC rally peaked at 0.0881 on August 13th following the announcement of September 15th estimate for the mainnet Merge. Ethereum has only traded at higher levels compared to BTC for 196 days since May 2016, or 8.62% of all days since May 2016. Since Jan 1st 2021, ETH has only closed at higher levels than today’s level 39 times, or 6.59% of all days since Jan 1st 2021.Based on the recent strength, it’s clear that traders want exposure to ETH as we’re approximately one month away from the Merge date. However, relative to BTC, ETH is trading near previous cycle highs, and the current level may not be long-term sustainable. Nevertheless, ETH might be able to maintain its strength relative to BTC as we approach the Merge. Still, the crypto market tends to overemphasize the impact of known events, and it is far from unlikely that the Merge becomes an inflection point for a short-term trend reversal.
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