Market deep dive: Ethereum transition from proof-of-work to proof-of-stake went smoothly


On Tuesday, CPI numbers were released. Most notably, Core CPI increased 6.3% YoY, which is 0.2% higher than forecasted. Nasdaq saw its largest daily drop of 5.16% since 2020, and BTC$ and ETH$ finished the day -9.91% and -8.27%, respectively. 

Yesterday, Ethereum successfully moved its consensus layer from proof-of-work to proof-of-stake. 

For us, too, the transition went smoothly. We were able to quote ETH throughout the entire period, and were able to resume settlement of ETH and ERC-20 without an issue.

The event was uneventful in terms of the spot price. ETH$ briefly spiked 3% before resuming its downtrend. This did not come as a surprise. It is impressive what the Ethereum Foundation was able to achieve. However, the full effect of the merge on the price will require time, and should prevail once we are out of this bear market. 

What did change was the ETH funding rates. Approximately four hours before the merge, the annualised funding rate reached -400.33% on FTX. This meant it cost 1.09% to be short the perpetual future per day, giving ETHW a pre-merge estimated value of $16-$17. Once the merge was successful, and the snapshot for a potential ETHW coin was taken, investors closed their short futures positions and sold their spot ETH. The funding rate has started to normalise, and is currently roughly at -16%.

FTX was the first major exchange to launch a synthetic ETHW. Just as the other listed pre-merge ETHWs, it first only represented a potential ETH PoW price. 

The most vocal group, @EthereumPoW, announced the plan for their forked coin yesterday. Since then, Kraken, Huobi, and OKX have listed the coin. Poloniex has chosen to first list EthereumFair (ETF), a lesser promoted fork. It will be interesting to see how many others follow, and which ones survive.

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