Ethereum futures backwardation hints at 30% ‘airdrop rally’ ahead of the Merge

Bulls of Ether (ETH), like a positive spread between spot and ETH futures prices, because the so-called contango reflects optimism for a higher future rate. However, the Ethereum futures curve has slid in the other direction since Aug. 1.

Backwardation: Ethereum quarterly futures

The daily chart shows that the Ethereum futures quarterly contracts are in backwardation. These conditions are opposite to contango and see the futures price fall below the spot price.

On Aug. 1, the spread between Ethereum’s spot price and its futures price increased to -$8

Daily price chart for ETH230-ETHUSD Source: TradingView

On the one hand, the current ETH spot market price is higher than its year end outlook. This seems like a bearish sign. The current negative spread between Ether spot price and Ether futures price may indicate that traders are bullish on ETH.

Bitcoin (BTC), for instance, has experienced a 15% increase since its futures entered into backwardation in June. This was the first time in a whole year.

ETH could rally on the “airdrop” hope

Analysts believe that a possible chain split would be bullish as we approach the Merge in September.

Roshun Patel (ex-Vice President of Institutional Lending at Genesis Trading) noted that December Ether futures are now in backwardation because of Ethereum “fork odds,” which could lead traders to buy spot ETH before the Merge.

Patel suggested that traders might be trying to offset their upside risks by taking bearish positions in December futures contracts.

dec flipping to backwardation on the eth price starting to price in forks. Back in 2020 the play with the bchabc fork was buy spot and short the quarts
Roshun Patel (@roshunpatel), July 31, 2022

Galois Capital’s Merge survey prompted the statement. The July 28 Twitter poll asked crypto hedge funds to ask their followers if the Merge would result in the Ethereum chain being split into a proof of work (PoW), ETH1 and a Proof-of-stake(PoS), ETH2.

The majority of respondents said that the upgrade would result in a hard fork. However, 53.7% predicted a smooth transition to the network.

Question 1: What happens when you merge? If you choose Choice 2, or 3, then go to Questions 2-5.
— Galois Capital (@Galois_Capital) July 27, 2022

Ethereum’s possible chain split will mean that ETH holders will receive equal tokens on both chains. An airdrop would give ETH holders the same number of ETH1 tokens as Ethereum Classic (ETC), in 2016

ETH price technicals flash “golden cross”

Ether is now consolidating within a key resistance bar of $1,650-1,750 that was used as support during the May-June 2022 session.

The token’s exponential moving averages (EMAs) of 20-day (green), and 50-days (red), have formed a “golden crossing,” suggesting an interim bullish outlook.

Daily price chart for ETH/USD Source: TradingView

A breakout from the $1650-$1,750 resistance level could see ETH target $2,150. This level served as support in January and resistance in May and Juni. It is now near $2,180 and coincides with the 200 day EMA (the blue waves), up nearly 30% since August 1.

Related: Ethereum Merge – How will the PoS Transition impact the ETH ecosystem

A pullback from resistance could lead to ETH moving toward the 20-day EMA at $15.250 and the 50-day EMA at $1,500.

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