The effects of the upcoming Ethereum Merge on the crypto market have been very obvious. It has affected not just the price of ETH but the prices of other digital assets in the space, triggering a run-up that has brought them towards monthly highs. The effects have not ended at the spot market ,though. Data shows that it is being felt across the futures markets, where prices have been falling toward all-time lows.
Ethereum Futures Falls Relative To Spot
Ethereum futures have always traded at a slight premium compared to spot prices. This has not been a problem because such is the case across other digital assets such as bitcoin. However, the Merge has changed things in ways that were not anticipated.
The numbers for last week show that the premium on Ethereum futures are getting larger relative to spot prices. The first was noticed on the Binance cryptocurrency exchange ,where the futures were trading at a 5% discount on Monday. It also spread to other crypto exchanges such as FTX, which has also seen a large discount in this regard.
This is not the first time that the futures will be trading at a discount to spot, but it is the lowest that it has ever been. The CME is also not left out of this as it is seeing the Ether futures trade at a discount to spot prices for the first time since they were launched back in February.
ETH futures trading at new all-time low discount to spot | Source: Arcane Research
All of this has been a long time coming from eh various shutdowns of major platforms across the crypto space. However, the anticipation around the Merge has further fueled the fire, driving the discounts larger than they should be.
Reason Behind Stark Differences
As mentioned above, the growing discount between the futures and spot prices has been a result of the Merge. More specifically, it has been a result of the various trading strategies adopted by investors to try to maximize their gains.
ETH recovers above $1,800 | Source: ETHUSD on TradingView.com
There has also been some pushback to Ethereum moving from a proof of work mechanism to a proof of stake mechanism. As a result, there have been attempts to split the chain through a hard fork and try to retain the current PoW mechanism. The hard fork is already receiving backing from notable figures such as Justin Sun and is expected to be a success.
It is the same thing that happened when the Bitcoin Cash hard fork was announced back in 2017. Prior to the fork, BTC futures had traded at a 9% discount compared to spot prices on Okcoin. But they had quickly recovered once the hard fork was completed. Since ETH looks to be mirroring the same trend, it is expected that futures prices will close the gap once the hard forks are implemented.
Featured image from TIME, charts from Arcane Research and TradingView.com
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Source: https://bitcoinist.com/merge-effects-continue-as-ethereum-futures-prices-fall-to-all-time-lows/