Take What the Defense Gives You
So Long Summer
As the sun sets on a tumultuous summer, we bring you a note filled with resolve as we continue to discuss the opportunity that remains on the table for those positioning ahead of the Merge. For those wishing to review a comprehensive summary on the matter, we invite you to check out the report we released this week. Despite the recent selling pressure across risk assets, we still think there is an opportunity for ETH to outperform heading into and/or following the Merge once the change in flows starts to manifest.
One of the emerging reasons we continue to add on pullbacks here is that data suggests that investors are simply underexposed/not positioned long into the network upgrade.
We have previously discussed the popularity of being delta neutral into the Merge and being long ETH/BTC, but based on market data, we think that the plain long spot ETH/USD is an undercrowded trade.
Increase in Leverage
Below we note that leverage is increasing as denoted by futures open interest divided by the total ETH market cap. We put a vertical line on the chart to denote where the fallout from 3AC cratered prices to YTD lows, thus informing us of where this ratio started to increase due to heightened derivatives volume as opposed to a declining denominator.
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