BitMEX Offers Leverage on Trades With Possible Ethereum Hard Fork

The much-speculated hard fork on the Ethereum network continues to generate controversy in the market. This time with BitMEX, which plans to offer leveraged exposure in ETHPOW, name of the token that will represent the hard fork.

The division has not yet happened, but the hard fork is already causing controversy in the market. ETHPOW, as the name implies, would maintain the Proof of Work (PoW) consensus and thus mining. It came about as a protest against The Merge update, which will bring about the end of PoW on ETH.

However, most developers and protocols are not supporting the fork. Chainlink recently spoke out stating that it will not support an eventual ETH split.

Highly speculative contract

Starting this Tuesday (9), traders will be able to make loans and bet on the token. BitMEX will allow a leverage level of up to two times. That is, if the client has $2,000 in his account, he can trade with a limit of up to $4,000.

To use contracts, the client will need to leave USDT as a margin guarantee, on the ETH network (ERC-20).

As ETHPOW does not yet exist, it does not have a reference price for contracts. But BitMEX highlighted that the contracts will be different from the traditional ones. For example, they will use the last price tag to compensate for the lack of this reference.

There will also be limits on the maximum and minimum bids that traders can place around that price. The limits will have automatic updates performed every hour.

BitMEX also stated that the contract includes greater risks of automatic deleveraging, as the contract is “purely speculative” at the moment. “This is a highly speculative contract (ETHPOW does not yet exist and may never exist),” the announcement reads.

Hard fork issues

While supporting ETHPOW, BitMEX has doubts about the hard fork’s success. Analysts expressed doubts about the long-term viability of a split, particularly given the lack of community support.

However, BitMEX acknowledged that it could provide a profitable “short to medium term” trading opportunity. And it is precisely in this sense that the platform launched the new futures contracts.

Furthermore, ETH co-founder Vitalik Buterin recently noted a problem that could face future ETH hard forks: lack of cooperation from stablecoin issuers. Eventually, a stablecoin might crash on one of the networks.

“Because at that point, you will have 100 billion USDT on one blockchain and 100 billion USDT on the other blockchain. So they [Tether ou outros emissores] need to stop respecting one of them,” explained Buterin at the BUILD Conference on August 7.

This poses a problem, as the most used type of token on Etherem is precisely stablecoins. If your issuers stop accepting redemptions for the token on a given blockchain, the tokens on that chain will lose parity to the dollar, hurting your entire economy.

About the hard fork

The one who started the rumor about a split in ETH was Chandler Guo, an influential miner on the network. Last month, Guo and other “relevant individuals” within the ETH community began actively discussing how to coordinate this split.

If the split does happen, the most likely date for it is September 19, the date set for The Merge’s release. From that day on, mining via PoW will effectively end, giving way to PoS. This will transform the method by which the network is protected, eliminating the need for intensive energy consumption.

In other words, the ETH mining industry will shut down, wiping out miners’ profits. In this way, the split will encourage its participants to push for a split in the network.