The London fork occurred smoothly on the Ethereum network yesterday, 5 August 2021, at block 12,965,000, mined at 12:33 PM UTC.
This is an important update because, among other things, it also introduces a partial fee burn mechanism.
Indeed, the fork introduced the changes of EIP-1559, which stipulate that every transaction on the current Ethereum blockchain will result in the burning of the base fee.
It also constitutes another important step in the transition to Ethereum 2.0, with the change from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
The next step will be the Shanghai hard fork, scheduled for later this year.
The impact of the fork on the price of Ethereum
It is possible that the anticipation of the London fork has benefited the price of ETH in recent days.
In fact, over the past two weeks, it has risen from around $2,000 to the current $2,780, a 35% increase and peaking yesterday at over $2,800 just hours after the fork.
Following the fork, the price of ETH seems to have stabilized at just under $2,800.
Paradoxically, yesterday, after the Ethereum fork, it was the price of bitcoin that rose the most, rising from $37,600 to over $41,000 in a matter of hours, a rise of 9% in a very short time, but then stabilizing a little above $40,000.
The price of BTC had also been rising for a fortnight, but in the last seven days, it had fallen from almost $42,000 to $37,600. This timing could be related in some way to the Ethereum fork, and especially to the anticipation of it.
It should also be added that today $357 million of ETH derivatives expire on Deribit, which currently holds an 86% market share in this specific segment. However, the ratio between buy and sell options seems reasonably balanced as the call-to-put ratio stands at 1.15, i.e. with a slight advantage of call options suggesting a neutral-rising scenario.
Analysing these options expiring today, i.e. the day after the fork, it can be seen that most investors probably did not expect the price of ETH to rise so much in recent weeks, as if it remains above $2,700 by tomorrow, all 61,653 put (i.e. sell) contracts on Deribit will be worthless. This is an unusual scenario that reveals how unexpected the sharp rise in price was.
However, it is worth noting that the price of ETH had already risen above $2,700 in early June, so this is by no means an abnormal scenario. However, after the drop to $1,750 at the end of June, it certainly came as a surprise to many.