With the Merge getting closer and closer, with the announced date of 19 September 2022. There is a possibility of an Ethereum chain split, when miners decide to still run the PoW chain, resulting in the creation of a new ETHPoW coin besides the transferred ETH2 coin.
Altough we have to consider the viability of the ETHPoW chain, which is guaranteed to be a minority chain in respect to the price and economic chain usage of ETH2. There could definitely be an exciting trading opportunity for speculators in the short to medium term.
What could be a risk free trading idea?
As with this potentially chain split, the Merge could provide a possible ‘risk free’ trading option. We’ll take a look at how you can position yourself in case of the possibility of the ETHPoW coin.
- Before The Merge
Convert all your USD into USDC in your own Ethereum wallet.
- As soon as the Merge occurs
Sell your (worthless on the ETH2 chain) USDC on the ETHPoW chain for ETHPoW coins on an decentralized exchange such as UniSwap or Curve
- After The Merge
Your USDC from the ETHPoW chain will be transferred to the ETH2 chain. Leaving you with your original USDC on the new ‘merged’ chain.
- When centralized exchanges enable ETHPoW deposits
Sell all your ETHPoW coins on the exchange for USD
- You have made a profit!
Following the above trading idea, leaves you with more USD for free with almost zero risk. Altough there are always risks of volatile price movements.
What are the risks and complexities of this trade?
In reality executing the above trade is actually quite complex with several issues which require managing:
- You will need to act fast because Liquidity pools selling the ETHPoW coin could be drained quickly. There is also a possibility that liquidity providers – LP’s may be aware of this potential risk and withdraw liquidity prior to/or even quickly after the Merge.
- You need to manage your own keys and not use a custodian. Any third party custodian is unlikely to support ERC-20 coins on ETHPoW after the split.
- You may need to run your own Ethereum nodes (video below) and directly interact with the exchange smart contracts on ETHPoW because most infrastructures will probably support the Merge and ETH2.
- You may have to create a split smart contract to make sure your sell/swap order of USDC does not get replayed on the ETH2 chain.
This may be quite complex for some, but this difficulty is where the profit will come from. Although there are many technical challenges that ETHPoW faces, as long as the chain survives, it looks likely that centralized exchanges could list the coin.
When the ETHPoW coin may generate a lot of excitement and nostalgia and possibly result in a popular trading pair ETH/ETHPoW after the Ethereum chain split. So, If you want to capitalize on this opportunity, you’ll have to learn new things and act differently than the majority.