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Trading ETH merge with CFDs

What is Ethereum (ETH)?

Ethereum is a decentralized, open-source blockchain with smart contract functionality. The cryptocurrency of the Ethereum (ETH) platform is the world’s second most popular cryptocurrency after Bitcoin. It was founded in 2015 by Vitalik Buterin and is now an active and important currency within the cryptocurrency market.

What is Ethereum (ETH) merge?

The Ethereum merge is a network update to transition Ethereum from Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus mechanism. The PoW requires computer power to solve complicated math equations in order to mine Ethereum. The new network PoS will reduce the energy costs to process Ethereum transactions by 99% because mining will no longer be needed.

The merge is scheduled for around September 15, 2022, and could have a large impact on all cryptocurrency markets, not just Ethereum. Recently sentiment in the Crypto markets is impacting equity and FX markets, so a positive merge will likely result in rises in equities and risk-on currencies like the GBPJPY.

Why is the Ethereum (ETH) merge happening?

It has taken two years of preparation to find a way to make Ethereum more secure and eco-friendly. Currently, Ethereum can execute 15 transactions per second. Following the merge, up to 100,000 transactions per second could be possible. The negative environmental impact of cryptocurrencies has been an issue for many years, and a successful merge would reduce the energy required and increase confidence in Ethereum. After the merge, there will be increased client diversity which some people think will strengthen the security of Ethereum.

How will the Ethereum (ETH) merge impact the market?

Currently, the market is forecasting a successful merge which is reflected in the recent price rise of ETH. Even if the merge goes well, there is a chance that the market might not rise significantly. News is difficult to forecast, so it is important to read the price movements rather than concentrate on the announcement.

Confidence in Crypto markets is always vulnerable and problems with the merge could have a very negative impact on ETH, Bitcoin, and other cryptocurrencies. Regardless of the result, it will take time to determine the success of the merge resulting in high volatility.

Ethereum (ETH) CFD technical analysis for the merge

Ethereum (ETH) daily chart

Resistance: 2000, 2300, 3000, 3550
Support: 1400, 1000, 675, 500

2022 has been a negative year for all Crypto markets, with Ethereum falling 55% and Bitcoin falling 53%. Over the past months, the prices have recovered as Ethereum found support at $1,000 and Bitcoin at $20,000. Despite many Crypto traders making losses this year, many people still believe strongly in the long-term future of cryptocurrencies.

A positive merge could trigger a quick return to the $2,000 resistance level from August 2022, then $3,000. Given the strength of crypto market trends large price movements are possible. Alternatively, a negative merge would be a surprise and see Ethereum reverse the gains from July 2022 and potentially return to $1,000.

Important market events result in a high level of volatility. There will be many profitable trading opportunities for traders with a clear plan. With any news event, the market will likely have different views on the long-term impact on prices resulting in large and quick price movements.

Short-term ETH CFD merge trading strategy

Reversal strategy

For short-term traders, there will be reversal trading opportunities due to the high volatility. A popular strategy for day traders is to use a 10-period moving average on a 5-minute chart and wait for prices to form a large gap above or below the moving average. When there is a gap from the moving average there is a high chance of the market returning to the moving average.

When trading a reversal strategy, it is important to wait for the market to stop moving and start to reverse. So when prices are above the moving average, wait for a down bar to form on the chart before selling. When reversal trading, you will not need a large stop. It is best to exit losses quickly and wait for another trading opportunity.

Trend strategy

Following the merge, market volatility will return to normal, and a trend should develop. Traders who can be patient and wait for a trend to form will find high-risk-reward trade opportunities. One way to follow the trend is to use a moving average and wait until the market returns to the moving average and trade in the same direction as the moving average.

Long-term ETH CFD merge trading strategy

Ethereum usually has very high volatility and will increase following the merge, so a clear trading plan is needed. Ethereum exhibits strong trends so following the trend when long-term trading is the best strategy. An hourly or daily chart will help you avoid overtrading and worrying about short-term moves. Trading in the same direction of a moving average and avoiding trading a break of support or resistance will help you set a higher target than stop loss on your trade.

Titan FX, offers traders the ability to trade cryptocurrency CFDs with 20:1 leverage, low spreads, and no commission. Clients can trade ETH CFDs with MT4 or MT5 without holding the asset, allowing you to focus on trading. The merge of ETH will present many trading opportunities for short and long-term traders, so let`s trade ETH with Titan FX.


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