The listing of ETHPOW (ETHW) on several crypto exchanges has resulted in a steep drop in price despite some initial success.
ETHPOW dropped 80%
On the daily chart, the price of ETHW fell more than 80% to $25 on September 10, a month after its market debut.
For starters, ETHPOW only exists as a futures ticker, for now, it is conceived in anticipation that an upcoming network update on Ethereum could result in a chain split.
Ethereum will undergo a major protocol change called Merge by mid-September, switching its existing consensus mechanism from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
Therefore, Ethereum will be obsolete its army of miners, replacing them with “verifiers”, which are nodes that will perform similar tasks along the network by giving them a certain amount of tokens.
As a result, current Ethereum miners will be forced to migrate or close to other PoW chains. Ethereum Classic (ETC), which carries the original Ethereum PoW code, has benefited the most by being a haven for such miners.
For example, the chart below shows that Ethereum Classic’s hash rate is rising and Ethereum’s hash rate is falling in the days following the merge.
But Ethereum Classic may not be the only option for ETH miners.
Chandler Guo, one of the most prominent crypto miners as proposed That miners continue to validate and add blocks to the current PoW Ethereum chain after the merger. This so-called controversial hard fork will survive the current Ethereum PoW chain, dubbed ETHPOW by Guo and supporters.
And just as the Ethereum blockchain has its native coin in Ether (ETH), the new ETHPOW chain will have its own asset, ETHW. Anyone holding ETH prior to the merge will receive the same amount of ETHW after the potential chain split.
RELATED: Ethereum Merge Could Trigger Higher Volatility, BitMEX CEO Warns
However, given the significant downside risk of ETHPOW, traders appear to be more comfortable holding ETH, which enables them to acquire ETHW as well as have a chain split.
history will suggest $ETH PoW forks are the most sold. ETHW IOUs are now $30-33 (from 1 month ago -67%). I won’t sell forks – if it doesn’t – and your $ETH locked in the contract.
So if you’re fast, think of it as a free 1.7% dividend on your $ETH, https://t.co/RRCC7kmV24
— Mira Cristanto (@asiahodl) 9 September 2022
Furthermore, the declining price of ETHW could also indicate that traders are betting that the chances of a split on the Ethereum chain are becoming less and less.
Paradigm report hits another bearish blow on ETHW
In a report published on September 1, crypto investment firm Paradigm argues that the cost of an ETHW token should not exceed $18 after launch. This is down almost 90% from the coin’s all-time high of $198, set on August 9.
The firm cited backwardness, when futures trading was lower than spot prices, as the reason behind its $30-price target for ETHPOW in Ethereum September 18 futures contracts.
The report noted that some exchanges, including FTX and Deribit, will measure the rates of their ETH futures/perpetual contracts by referring to the PoS version of Ethereum.
And since the price of ETH futures now trades at a discount of $18 against spot prices, the ETHPOW token could attract a valuation of at least $18 on a potential fork.
“We can estimate how much ETH PoW will cost on a spot-future basis, as spot = PoS + PoW, while the future is just PoS,” the report said.
“Currently, the base ETH PoW price is ~$18, which is ~1.5% of the ETH market cap.”
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