It is looking like Ethereum borrowing is reaching very high levels leading up to the Merge. Is this signaling some hidden opportunity or just people gambling looking to make a quick buck?
Borrowing reaching new highs
The borrowing of Ethereum leading up to the Merge has reached some new height. It is so prevalent that some lending platforms have stopped lending Ethereum to their customers. Aave, is one of the sites more popular lending sites. And they are also one of the sites that decided to pause Etherium lending.
If we look at some of the data from Aave we can see a clear spike of borrowed Ethereum in the recent days leading up to the Merge.
Source: Aave
And we can also see the APY spiking right along. This means that if you have no real faith in the Merge or any of the forks that might happen. Then you might be able to get a nice return on your $ETH simply by lending it out.
Why are people borrowing Ethereum?
The only real reason I can see for doing this is if you are expecting a fork to happen. And by borrowing Ethereum and having it at the time of the snapshot you will get the airdrop of the new coin or token.
With these crazy numbers of borrowed Ethereum, the people who speculate here are probably assuming the new token will have s substantial value. And thus they can make a quick buck selling it immediately after the airdrop. Paying back the borrowed Ethereum and the interest.
So far I understand and am able to follow along with their reasoning. What I do not understand is even if the new fork has the same value as Ethereum. But where will its liquidity come from? Will it piggyback off of Ethereum's liquidity? I will assume it will not. So someone has to put some serious money into a form for it to be able to have any liquidity to speak of at all.
There is already an ETHPoW that you can trade on some DEX's and judging by that coin it is far from a success story. It started trading at $121 on August 8th. But not it is sitting on $29.57, down a massive 80% from its top notation of $143.
And Justin Sun is involved with the ETHPoW token as well. I have to say things are not looking good for the fork. But the real person leading the charge for an ETHPoW fork is Chandler Guo. He is one of the miners who banded together to lead the charge for what can only be described as a delusional goal. Having the Ethereum form become the new Ethereum allowing miners to continue to mine as if nothing has happened.
What are your thoughts on this lending Ethereum business? Are you looking forward to any fork and getting a new Coin, or are you being more cautious waiting till after the Merge to decide what to do regarding Ethereum and any fork? Please share your thoughts on this in the comment section down below.
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