How to Prepare For & Profit From The Ethereum Merge This Week
The ETH Merge is this week.
This is a BIG event for Ethereum, and it’s causing major ripple-effects.
In this post, I’ll cover what's going on + some information and resources on how to prepare for (and potentially profit from) this historic event 👇
- A quick primer on the ETH Merge
- What’s the new ETH PoW chain?
- Ripple Effects of the Merge
- How to Prepare and Profit
A quick primer on the ETH Merge
If you don't know much about the Merge, we made a primer video explaining what you need to know.
Consider subscribing to the channel for explainer videos simplifying complex crypto ideas through animation.
We’ve also written a 🧵 about this before:
What is this new ETH PoW chain?
The Merge is going to move Ethereum from Proof-of-Work to Proof-of-Stake. After this, there will be 2 Ethereum chains: PoS and PoW.
What we know today as the Ethereum Mainnet will operate as the ETH PoS chain after the Merge.
Proof-of-Stake (PoS) has many advantages over Proof-of-Work (PoW):
But a new PoW chain will also be formed. Those who hold mainnet ETH at the time of the merge will also receive ETH PoW.
The more ETH you hold on the mainnet at the time of the snapshot → the more ETH PoW you will have on the new PoW chain.
Because of this snapshot, many are trying to make sure that most of the Ether they hold is in the form of native ETH on the mainnet (as opposed to WETH or liquid staking derivatives on other chains).
This thread by @korpi87 explains it really well.
Don’t get too excited about the PoW chain though - most people have low expectations for the ETH PoW chain. They are just trying to claim the tokens, dump them and move on.
This thread by @hasufl explains why the ETH PoW chain is just a retail trap.
Now - for the side-effects of the Merge that we’re seeing in the market today.
Ripple Effects of the Merge:
- GPU prices are plummeting
They are already down 73% as PoW mining will soon become a lot less attractive.
(Credit to Pete Huang from Coinbase - he's a great person to follow on LinkedIn)
2. stETH price has fallen to 0.9596 WETH.
- Likely because people are trying to stack native ETH for the ETH PoW snapshot.
- The utilization and interest rates for borrowing ETH on @AaveAave shot up as people started stacking ETH to farm the ETH PoW snapshot.
4. So much so that Aave has temporarily paused borrows on the ETH market, fearing the high utilization might interfere with liquidations and increase chances of insolvency for the protocol.
They are also worried about $stETH price deviating further causing causing destructive domino effects.
More than 96% voted yes to temporarily pausing $ETH borrows on @AaveAave.
How to Prepare & Profit
This thread by @lemiscate is an excellent guide on what to do (and what not to do)
The gist of it:
• Doing nothing is ok (seriously!)
• Get your money out of CeFi as they won't support ETH PoW.
• CEXes are also likely to stop withdrawals close to the Merge.
• Mainnet DeFi plays like lending $ETH can be profitable
• You could buy $stETH (or other liquid staking ETH tokens) at a discount
• Monitor L2s for arb opportunities
If you're planning to borrow ETH to farm ETHPoW, @BarryFried1 points out that @eulerfinance has some very cheap rates.
Barry is a DeFi giga-🧠 – definitely worth following.
But don't be blindly bullish on the Merge.
• It might be underwhelming - won't change all that much immediately.
• It could be a "sell the news" event.
• You could lose $ trying to play the merge.
• There could be destructive domino effects (like stETH depeg)
And of course, there's always a chance that it could all go catastrophically wrong and doom crypto forever.
(unlikely, but anything is possible 😅)
Once again, it’s worth repeating:
Doing nothing is ok!