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

Market Analysis

Institutional investors are piling into Ether-based digital asset funds, which have recorded seven straight weeks of positive inflows, according to the latest CoinShares report. 

Said inflows reached $16.3 million last week, adding to a total of $159 million in inflows over the last seven weeks.

CoinShares Head of Research James Butterfill on Aug. 8 said the rise in market sentiment for Ethereum-focused products is largely due to “greater clarity” relating to the upcoming Merge, which is set for Sep. 19, with Butterfill stating: 

“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.”

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

The Goerli and Prater testnet merge is also expected to take place this week, which will be the last scheduled dress rehearsal before the mainnet Merge takes place in less than six weeks’ time.

Traders gearing up

Blockchain analytics firm Glassnode suggested that the highly-anticipated Merge has crypto traders gearing up to “buy the rumor, and sell the news.”

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

In a newsletter titled “Betting on the Merge” on Aug. 8, the analytics firm noted that post-Merge, the ETH options, and futures market is positioned in “backwardation” — a situation in which the current price of an asset is higher than the prices trading in the 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.

Related: Ethereum options data show pro traders ready to go long into ETH’s Merge

However, the jury is still out as to how the Merge will ultimately affect Ethereum’s price. In a recent interview, Ethereum founder Vitalik Buterin remained optimistic about ETH’s long-term prospects saying that the narrative will likely remain positive post-Merge — as 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.”

The price of Ethereum is $1,776 at the time of writing, up 8.6% over the last seven days, according to data from CoinGecko. 

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