Ethereum upgraded has changed the proof-of-work network to Proof-of-stake. This transition will see the merger of the Ethereum mainnet with the Beacon Chain into a single, single blockchain.
EtherNodes estimates that Ethereum will transition if there is no technical problem. Prior to releasing the Merge, developers from the EtherNodes team had confirmed its contents.
Recent reactions to the Merge have received a variety of emotions. The Merge had a significant impact on ETH and its derivatives within the cryptocurrency market. Some people are expecting an unexpected price spike and are building more. Some people are selling off what little they do have in fear of volatility.
Sentiments on Merge Impact ETH Funding Rates
The Ethereum blockchain is attracting more attention and expectations. However, the estimated transition time could vary depending on how the miners are doing. The ETH futures traders appear to be calculating how they will move, based on the way things look.
CryptoQuant data revealed that Ethereum funding rates have fallen to an all-time low. The Ether derivatives have seen their lowest point to date at this recent level.
The ETH funding rate measures the price convergence between contract and underlying asset. This indicates whether the payments are from short-term traders or long-term traders. The difference between an asset’s spot and the perpetual futures contract prices provides the funding rate.
Inverse Value and Implications of Ethereum Funding Rates
CryptoQuant data gives a negative value to the Ethereum funding rates. Short traders are the dominant force within the order books. Accordingly, they will pay long traders accordingly.
Futures traders attach great importance to funding rates. Because these rates act as spontaneous catalysts and can change traders’ trading positions positively or negatively. They could make large profits or lose a lot of money.
High leverage traders who use high levels of funding will usually lose. This flip can happen even if the market does not have a bearish trend. As protection, some may choose to hedge.
Futures traders may be hedging spot exposure by using the negative ETH funding rate. The Merge is a significant explanation for these results. Trades should therefore be cautious due to the potential volatility following the transition.
Featured image by CNN. Chart by TradingView.com