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How to make money on Ethereum — the George Soros method

Igor Grigorchenko

News editor

Aug 18, 2022 at 12:58

The great and terrible Arthur Hayes, the founder of several famous crypto exchanges, an investor and insider, published a new essay. As always, Arthur is quite verbose, which makes many of his fans not able to read his message even to the middle. But we did. This time our hero discusses the near future of Ethereum and possible prices in the market after The Merge (in our column To make a long Hayes short).

Intro

Arthur Hayes has published another long essay titled “ETH-flexive” in which he shares his thoughts on the near future and prices of Ethereum. It will be of interest to anyone looking to earn money from the upcoming The Merge.

He wrote such a huge long read that we decided to do a Totally Short Summary and just a Short Summary for his text. In the last part, we quote some of his interesting statements.

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Totally Short Summary

Before the grand event on the crypto market (future Ethereum fork), Arthur wrote a detailed action plan for any investor.

  • What will happen if the merger succeeds/fails.
  • Cited a strategy for investor behavior for every scenario that could happen.
  • Possible price ranges for all different scenarios are suggested. None of the scenarios should take you by surprise.

If you’re already dizzy even from honoring these three points, you can just remember the main conclusion Arthur came to:

“Buy The Fucking Dip.” This thesis is sure to bring you profits until mid-September.

Short Summary

Arthur Hayes applied George Soros’ theory of reflexivity to Ethereum and its merger — based on it, he gave a bunch of investment recommendations for buying ETH with detailed arguments and justifications.

Here are the main points and conclusions:

  • Especially for alarmists: Ethereum won’t fall below $800–1000 even if the team fails the transition to PoS (or postpones the transition once again).
  • The market at this point believes that a successful merger is becoming more and more likely. Even despite the crypto winter, things are going very well so far.
  • From an investor’s perspective, ETH looks cooler than BTC right now. Demand for Ethereum has been growing all of August steadily and will continue to do so for at least another month.
  • After the switch to PoS, the second cryptocurrency emission will decrease from 13,000 ETH to 1,000-2,000 ETH per day. This suggests that Ethereum deflation will increase, which is a good argument not to fix profits even after The Merge event.
  • The issue will not depend on ETH’s price or Ethereum blockchain usage’s intensity, which is also a positive factor.
  • Ethereum has a tremendous future; smart contracts rule. The ceiling of Ethereum’s development will be a situation where all of humanity will have an address on the network. 
  • Arthur Hayes himself takes a long position and applies the “Buy The Fucking Dip” formula at every opportunity. And while he doesn’t give investment advice, he observes that any Ethereum downside is steadily bought back. So if you are about to enter the market, here is his ready formula for success.

Some Key Quotes

The method to be used for the analysis:

Soros’ central theory — which he dubs the “theory of reflexivity” — is that there is a feedback loop between market participants and market prices. The basic idea is that the market participants’ perception of a given market situation will influence and shape how that situation plays out. 

The expectations of market participants influence market facts (or so-called “fundamentals”), which, in turn, shape participants’ expectations, and so on and so forth. To put it even more simply, the participants — consciously or not — often play a major role in bringing about the very future they speculate on. Their biases can reinforce a rising or falling price trend because the future becomes a self-fulfilling prophecy.

The two main options for analysis with the Method:

The Merge Happens:

If the merge is successful, there is a positive reflexive relationship between the price and the amount of currency deflation. Therefore, traders will buy ETH today, knowing that the higher the price goes, the more the network will be used and the more deflationary it will become, driving the price higher, causing the network to be used more, and so on and so forth. This is a virtuous circle for bulls. The ceiling is when all of humanity has an Ethereum wallet address.

The Merge Does Not Happen:

If the merge is not successful, there will be a negatively reflexive relationship between the price and the amount of currency deflation. Or, to put it another way, there will be a positively reflexive relationship between the price and the amount of currency inflation. Therefore, in this scenario, I believe traders will either go short or choose not to own ETH.

When to sell or go short?

The best time to short is right before the merge is supposed to happen. This will be when expectations are at their highest, and you will have a short time between entry into the trade and when the merge will or will not happen. If the merge is unsuccessful, the dump will be quick and vicious given the market’s high expectations vs. the objective reality. That will allow you to exit your trade quickly, with profits in hand.

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