Assuming you are long via some ETH-related instrument, the question becomes — do you reduce or close your long position entirely right before the merge happens?

As the positive reflexivity drags the price of ETH higher pre-merge, textbook trading suggests that you should at least reduce your position right before the merge. But, actual reality rarely lives up to expectations.

However…

The structural reduction in inflation will only happen post-merge. I expect we will see it play out similar to Bitcoin halvings — i.e., we all know the dates they will occur, and yet, Bitcoin still always rallies post-halving.

That said, it’s possible the price of ETH dips slightly heading into and right after the merge. Those who cut partially or fully would initially feel great about their decision. However, as the deflation kicks in, and due to the reflexive relationship between a high and rising ETH price and usage of the network, the price could keep gradually grinding higher. At that point, you would have to decide when to get back into your position. This is usually a very mentally challenging trading situation. You believed in the long-term trend, but wanted to trade around your position– and now, you must pay higher prices to re-establish your position. It hurts, because you are always waiting for that dip when you ***know ***it’s time to buy back in. But the dip — or at least, a dip to the extent you are looking for — never happens, and you either never reestablish the same size position, or you miss out on a large portion of the gains.

With that thought experiment in mind, and my conviction about the reflexivity of this situation, I will not reduce my position going into or right after the merge. If anything, I will add to my position if the market sells off– as I believe the best is not (and cannot) be priced into the market today.