Bitcoin has declined by more than 50% this year and has recently been capped by tightening monetary conditions, trading in the $19,000 to $25,000 area. At the time of publication, Bitcoin was changing hands at $20,704, down 3.54% in the last 24 hours.
Over the past five years, September has consistently been the worst month for Bitcoin, with an average price decline of 10%. This is evidenced in derivatives data, as traders are paying a lot more for protection below $18,000.
Traders are willing to pay higher premiums for deep out-of-the-money puts, as evidenced by implied volatility skew; the increase is especially sharp closer to the $15,000 strike, which has the second-highest concentration of puts for the September expiry. This implies that most traders expect bitcoin to drop further in September.
The Ethereum network will undergo a major software upgrade, the Merge, in September, which is being billed as a seamless transition. With over 3,400 active distributed applications that are built on the platform, most have a cause to worry. Toby Lewis, CEO of Novum Insights, believes, “It could be a very bumpy journey.”
One only needs to recall Ethereum’s 2016 upgrade, when the network was subjected to weeks-long “replay attacks,” in which hackers replayed user transactions to steal tokens.
According to reports, the Yunbi exchange lost 40,000 Ethereum Classic coins. Since then, developers have put in place network-based security safeguards. However, Josselin Feist, technical director at Trail of Bits, warns that attacks could still occur if any of the smart contracts that run the variety of apps on the network have not been built correctly.
Participants in the industry have already announced safety measures. The biggest US cryptocurrency exchange, Coinbase, announced that it will “briefly” halt withdrawals and deposits of all Ethereum-based tokens around the time of the merge.
“Replaying attacks are possible during the merge as the network becomes less secure and more vulnerable to attacks when forks happen,” Justin Sun, Tron Founder, told Bloomberg.
On the other hand, Ben Edgington, lead product manager at ConsenSys, is optimistic, saying, “I don’t expect replay attacks to be a significant problem, if they occur at all.”
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