Institutional Investors Keep Flocking to Ethereum amid the Merge Frenzy

According to the latest CoinShares report, Institutional investors are piling up Ethereum-based digital asset funds for seven straight weeks. 

The report also noted that Ether-based funds saw an inflow of over $16.3 million last week, which added a total of $159 million in inflows over the last seven weeks.

In contrast, Bitcoin saw very outflows totaling $8.5M. Additionally, short-bitcoin investment products saw a record outflow of $7.5M for the second consecutive week, indicating investors believe bitcoin prices have troughed.

Digital asset investment products saw inflows totaling $3M last week, marking the 6th consecutive week of inflows totaling $529M, representing 1.7% of total assets under management (AuM). Despite the price crash 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.

CoinShares Head of Research James Butterfill believes that the rise in market sentiment for Ethereum-focused products is mainly due to the upcoming Merge, which is scheduled for 19 September 2022

This most anticipated Merge will see the Ethereum Mainnet merge with the Ethereum 2.0 Beacon Chain, completing the transition from proof-of-work (POW) to a proof-of-stake (POS) consensus mechanism. The Merge is expected to make the Ethereum blockchain more secure, energy efficient, and environmentally friendly.

In addition, the Goerli and Prater testnet merge is scheduled for this week, which will be the last dress rehearsal before the mainnet Merge.

Ethereum Traders Remain Excited 

Blockchain analytics firm Glassnode suggested that ahead of the highly-anticipated Merge, Derivatives traders are placing directionally obvious bets for Ethereum before the upcoming Merge.

The firm also noted in a newsletter titled “Betting on the Merge” that post-Merge, the ETH options, and futures market is positioned in “backwardation” — a scenario where the current price of an asset is much higher than the prices in the futures market.

Additionally, the number of unique addresses on the ETH blockchain has steadily grown since Ethereum’s inception. A sudden upsurge in the number of unique addresses might be due to short-term volatility in the price action as traders are positioning or new users adopt the network, usually causing a consequent rally.

However, the jury is still unsure how the Merge will ultimately affect Ethereum’s price. In a recent interview, Ethereum founder Vitalik Buterin remained highly optimistic about ETH’s long-term prospects saying that the narrative will likely remain positive post-Merge. This aspect hasn’t yet been priced in.

At the time of writing, Ethereum is $1,705, up 0.06% over the last 24 hours, according to data from CoinMarketcap.