As Merge draws closer, institutions have been flocking to Ethereum for 7 straight weeks

By: Ikenna Odunze

As Merge draws closer, institutions have been flocking to Ethereum for 7 straight weeks

August 9, 2022 9:41 PM

As stated in a CoinShares report, there has been a drive in institutional inflows into Ethereum products due to clarity around the Merge.


Seven consecutive weeks of inflows recorded as institutional investors pile into Ether-based digital asset funds.


The inflows over the past seven weeks amounts to $159 million, and the inflows for just last week got to $16.3 million.


On August 8, CoinShares Head of Research James Butterfill said the increase in market sentiment for Ethereum-focused products is greatly owed to "greater clarity" regarding the soon coming Merge set for 19th of September. James stated:


" 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"


To complete the transition from proof-of-work (PoW) to proof-of-stake (PoS) consensus mechanism, Ethereum mainnet will merge with the Ethereum 2.0 Beacon Chain. The PoS consensus mechanism is looking forward to making Ethereum more energy efficient, environmentally friendly and secure.


Also anticipated to happen this week is the Goerli and Prater testnet merge, which is going to be the last scheduled dress rehearsal prior to the mainnet Merge taking place in not up to 6 weeks' time.


Traders gearing up


The much anticipated Merge has gotten crypto traders prepped to "buy the rumour and sell the news." Said Blockchain analytics firm Glassnode.


“Derivatives traders are placing directionally obvious bets for Ethereum, specifically relating to the upcoming Merge planned on 19 September.”


"Betting on the Merge" the title of a newsletter on August 8, noted by the analytics firm is that futures market, post-merge and the Eth options is positioned in "backwardation" - a state in which an asset's current price is higher than the trading price in futures market.


Both futures and options markets are in backwardation after September, suggesting traders are expecting the Merge to be a 'buy the rumor, sell the news' style event, and have positioned accordingly," said the firm.


Furthermore, judgement as to how the Merge will greatly affect Ethereum's price is still out. Vitalik Buterin Ethereum founder, in a recent interview, stayed positive about Ethereum's long term prospects speaking of the narrative to likely remain positive post-merge as an aspect that hasn't yet been priced in.


"Once the merge actually happens then I expect morale is going to go way up. I basically expect that the merge is going to be not priced in, by which I mean not even just market terms, but even psychological and narrative terms. In narrative terms, I think it’s not going to be priced in pretty much until after it happens.”