The Shapella upgrade of the Ethereum network, scheduled for around 10:30 pm UTC on April 12, has induced significant uncertainty among traders, according to a Kaiko report.
The upgrade will allow staked Ether (ETH) withdrawals from the Beacon Chain for the first time since its launch in December 2020. According to previous estimates, the upgrade will add between 1.2 million and 3 million ETH selling pressure in the first few weeks. . This is one of the main reasons why traders seem to be taking a cautious stance ahead of the upgrade.
The Kaiko report shows that ETH lags Bitcoin (BTC) in spot and futures trading volumes, while options market data shows traders are actively adding short-term hedging positions.
Ether shows muted trading data
Ethereum’s market share of US dollar trading volume compared to Bitcoin declined to March 2021 lows near 30%, according to Kaiko data, showing that Ether has “struggled to keep pace” with the Bitcoin spot volumes. During Ethereum’s last major upgrade, the merger, its market share relative to Bitcoin peaked at 53%.
Similarly, the relative increase in open interest (OI) volumes for Bitcoin has considerably outpaced Ethereum with the April 10 price surge above $30,000.
The ratio between Ethereum spot and perpetual trading volumes also reflects the lack of trading interest. The ratio has fallen below the levels reached before the Merger.
Finally, the options market also reflected the uncertainty surrounding the improvement. The report found that the implied volatility of Ethereum options contracts expiring in April has been trending higher than all time frames for Bitcoin. It suggests that an increasing number of traders are looking to hedge their positions.
When demand for options increases, it implies that the market expects larger price fluctuations in the underlying asset and therefore higher implied volatility. The report added:
“All ETH maturities have moved closer to each other, while the longer BTC maturities have held steady, again indicating that there is more uncertainty, particularly longer-term, in the ETH derivatives markets.”
Related: Shapella Could Attract Institutional Investors To Ethereum Despite Risks
So far, the price of Bitcoin has risen 82.02% year to date compared to Ether’s 59.82% rise in the same period. The ETH/USD pair is facing resistance at $2,000 from a technical and psychological point of view. The Moving Average Convergence Divergence Indicator, a momentum oscillator, has been flat during Ether’s latest price rally, showing a lack of bullish momentum.
Ethereum’s falling market share compared to Bitcoin and muted business interest in connection with the merger highlights uncertainty in the market due to potential selling pressure after Shapella.
The lack of trading volumes and high implied volatility in options can induce significant price volatility over the course of the month, especially considering that selling pressure is expected to last three to eight weeks after the update.
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