Post Merge: ETH Futures activity tied to staking yields

The recent transition of Ethereum from a Proof of work consensus mechanism to a Proof of stake consensus mechanism was recently executed successfully. However this transition was followed by various changes in the blockchain network which was instantly noticeable to various traders on the network.

Changes post Merge

The Ethereum Merge was executed with the sole objective of applying various improvements on the structure of the network, strengthening it and making it more reliable and efficient. Apart from that it is presumed that the update will make Ethereum more eco-friendly as well as lower the amount of native coin “Ether” circulating on the network. Traders have stated that after the update a majority of activity of the futures market is now strongly linked to staking yields. The staking yields are the incentives which users can gain after locking Ethereum in the chain of exchange which will provide an opportunity to validate transactions in the PoS consensus mechanism.

This directly coincides with the fact that whenever particular payoff for wagering is high the population of wagerers on the network also increases proportionately. In this metric the demand for selling futures also increases exponentially. The demand increases because the wagerers on the network cannot withdraw their stakes on the blockchain until the next upgrade ie. The Shanghai fork is executed successfully. This particular upgrade is scheduled for mid-2023.

The stakers will get their rewards in the form of ETH. Due to this these stakers will also be directly susceptible to any kind of price fluctuations in the market. Therefore these stakers are bound to secure their Ethereum exposure by selling various Ether based future contracts in the market.

Analysts are of the view that stakers are any way natural sellers in any futures market. Therefore their open positions always turn out to be very high. Thus these positions directly grow if the staking yields are high.

The new mechanism on the network has occurred because the network moved to a Proof of stake consensus mechanism. In this consensus mechanism the miners only objective is to validate the transactions on the network in exchange for rewards. Due to this the new validators on the network turn out to be stakers and not miners.