Ethereum Futures Backwardation Hints at 30% Airdrop Rally ahead of the Merge


Ether (ETH) bulls like a positive spread between spot and ETH futures prices because the so-called contango reflects optimism about higher interest rates in the future. But as of August 1, the Ethereum futures curve slid in the opposite direction.

Ethereum Quarterly Futures in Backwardation

On the daily chart, quarterly contracts of Ethereum futures, which expire in December 2022, have entered backwardation, a state opposite to contango, where the futures price falls below the spot price.

The spread between Ethereum’s spot and futures price widened to -$8 on August 1.

ETH230-ETHUSD daily price chart. Source: TradingView

On the one hand, the current ETH spot price higher than the year-end outlook appears to be a bearish sign. However, the circumstances surrounding the current negative spread between the Ether spot and the futures price suggest that traders may be bullish on ETH.

For example, Bitcoin (BTC) has gained 15% since futures went into backwardation for the first time in a year in late June.

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ETH may unite with hope of “airdrop”

In addition, a potential chain split leading up to the September Merger is likely to be bullish according to some analysts.

Roshun Patel, former vice president of institutional lending at Genesis Trading, noted that December’s Ether futures have flipped into backwardation due to Ethereum’s “fork odds,” which could prompt traders to buy spot ETH ahead of the merger.

Meanwhile, Patel hinted that traders could offset their upside spot risks by taking bearish positions on December futures contracts.

The statement came after Galois Capital’s investigation into the merger. In the July 28 Twitter poll, the crypto hedge fund asked its followers if the merger would end splitting the Ethereum chain into the proof-of-work (PoW) ETH1 and a proof-of-stake (PoS) ETH2.

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Of the respondents, 33.1% said the upgrade would lead to a hard fork, while 53.7% expected a smooth network transition.

Ethereum’s potential chain split means that ETH holders will have an equal number of tokens on both chains. In other words, an airdrop that grants ETH holders have the same number of ETH1 tokens, a la Ethereum Classic (etc.) in 2016.

Technical Data ETH Price Flashing “Golden Cross”

Ether is now consolidating in a key $1,650 – $1,750 resistance bar that served as a support during the May-June 2022 session.

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Meanwhile, the token’s 20-day (green) and 50-day (red) exponential moving averages (EMA) have also formed a “golden cross,” signaling an interim bullish outlook.

ETH/USD daily price chart. Source: TradingView

A breakout coming out of the $1,650–$1,750 resistance bar could have ETH eye $2,150 as the next upward target. This level was instrumental as resistance in May and June and support in January. It now coincides with the 200-day EMA (the blue wave) near $2,180, up nearly 30% from the August 1 price.

Related: Ethereum Merge: How Will the PoS Transition Affect the ETH Ecosystem?

Conversely, a pullback of the resistance bar could expose ETH to the 20-day EMA (~$15,250) and the 50-day EMA ($1,500) waves.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move carries risks, you should do your own research when making a decision.