Institutions flocking to Ethereum for 7 straight weeks as Merge nears: Report

Traders take up the strategy of buying the rumour and selling the news as the much anticipated Ethereum Merge is coming closer

By Shashank Bhardwaj

Image: Shutterstock

According to recent research, Ethereum saw $16 million in inflows and is on a nearly 7-week streak of inflows totalling $159 million. This indicates that institutional investors are pouring money into digital asset funds based on Ether (ETH). James Butterfill, the head of the research, suggested the increase in market sentiment for Ethereum-focused products is largely due to 'greater clarity' regarding the upcoming Merge. He said,

"We believe this turn-around in investor sentiment is due to greater clarity on the timing of The Merge where Ethereum shifts from proof-of-work to proof-of-stake."

After months of delays, the much-anticipated Merge is set to take place on September 19 this year. With this upgrade, the Ethereum mainnet will merge with the Ethereum 2.0 Beacon Chain, completing the transition from a Proof-of-Work (PoW) to a Proof-of-Stake consensus mechanism (PoS). The goal of this upgrade is to eliminate the energy-intensive mining process while also securing the Ethereum network with staked ETH. Following the Merge, the Ethereum network is expected to handle more than 100,000 transactions per second. Furthermore, this upgrade is expected to make Ethereum 99 per cent more environmentally friendly.

The Beacon chain was launched in December 2020. It marked the start of Phase 0 of the three phases of the upgrade. The first phase is scheduled to be completed in the third week of September. The transition's final phase is expected to be completed by late 2023. The Goerli and Prater testnet merge is also expected to be completed this week, along with the Bellatrix consensus layer upgrade. It will be the final scheduled dress rehearsal before the mainnet Merge in less than six weeks.

Glassnode, a blockchain analytics firm, stated in its newsletter 'Betting on the Merge' on August 8 that the highly anticipated Merge has crypto traders preparing to 'buy the rumour, and sell the news.' In the newsletter, the firm said,"Derivatives traders are placing directionally obvious bets for Ethereum, specifically relating to the upcoming Merge planned on 19 September."

The above-mentioned report also noted that the digital asset investment market saw $3 million in net inflows last week. As quoted in the report,"Digital asset investment products saw inflows totalling US$3m last week, marking the 6th consecutive week of inflows that total US$529m, representing 1.7 per cent of total assets under management (AuM).

Despite the crash in prices in Q2 2022, 32 new investment products were launched, primarily in altcoins, second only to the peak of product launches in Q4 2021 at 33."

Shashank is founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist.

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