To The Moon

I think that Ethereum will succeed, but here are some warning signs that may undermine its success.

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Ethereum is the darling of the crypto world.

Decentralized, massive adoption and with many use cases, it is the coin that every other cryptocurrency aspires to be.

With the Merge just around the corner, the network will gain one more advantage.

Switching to a proof-of-stake (POS) protocol has been in the works for years. Currently, Ethereum runs on a proof-of-work (POW) protocol which is massively energy inefficient.

At the same time, it allows anyone with enough ETH staked to gain rewards for sustaining the network. This is unlike the current POW model that only rewards miners.

Hard Fork

As we edge closer to the Merge, Ethereum's price steadily increases. This is not surprising as the hype build-up and the future holds for Ethereum can excite anyone.

However, some argue that a vast sell-off is imminent.

This is because of a possibility of a hard fork.

Many miners are unwilling to support the Merge as it would impact their profits significantly. This is because they cannot mine new blocks for the network to gain rewards.

At the same time, they will be sitting with a lot of unused mining equipment. As a result, these miners may be forced to migrate to another POW network like Ethereum Classic.

The latter has shown a substantial increase in hash rate.

Screengrab fromhttps://2miners.com/etc-network-hashrate

This might seem simple enough until we look deeper.

Chaos

The chaos of the hard fork comes when Defi projects and other protocols using the Ethereum network have to decide how they would go about after the Merge.

If there happens to be a hard fork, these projects have to decide which one they would follow.

We can see that this can cause a lot of confusion and chaos.

And with every confusion in the markets, we can expect intense volatility.

Short Squeeze?

From what we have experienced in GameStop, a short squeeze happens when bears are forced to close their short positions leading to an upward tick in price.

This leads to a sharp rally.

Analysts have argued that the following might happen:

1. Perpetual futures open interest ratios are at all-time highs. This means that there are a lot of bets made on leverage. This increased the probability of a squeeze happening. A bearish position in the perpetual futures market indicates a possible short squeeze.
2. Short squeeze followed by a dump. As many people exit their positions after being tempted by the high rise in the price of Eth following the short squeeze, Eth will experience significant volatility.

What to expect?

We can only wait to see what happens.

But I am expecting a decent level of volatility to come. So it might be smart to buy some at the current prices.

If the short squeeze happens, it might be an excellent opportunity to collect some profits.

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