Institutions Are Still ‘Wait-and-See’ With Ethereum

Institutions Are Still ‘Wait-and-See’ With Ethereum

The Merger has finally happened, and while bitcoin remains the cryptocurrency of choice for institutions (and one nation-state, El Salvador), Ethereum’s new consensus mechanism – and the scalability that’s supposed to go with it – could be of some interest. to draw from the larger one. , older brother as the biting cold of the crypto winter continues.

However, institutions may be hesitant to jump all on ether just yet. One reason is regulatory uncertainty. United States Securities and Exchange Commission Chairman Gary Gensler said proof-of-stake cryptocurrencies could be considered securities, although the regulator said he was not talking about any specific bases. However, his comments helped the price of ether to take a hit on Thursday.

Meanwhile, it appears that if there was any flow from bitcoin to ether, much of that was stopped by the start of the Merger.

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At the beginning of the day – September 15 – that the Merger took place, ether was trading for about 0.0817 BTC on Binance, according to data from TradingView. Fifteen hours later, it was changing hands at 0.0746 BTC and continued to fall.

Ethereum/Bitcoin price chart over the past five days (TradingView)

Ethereum/Bitcoin price chart over the past five days (TradingView)

Read more: The Ethereum Merger Is Done, Opening a New Era for the Second Largest Blockchain

That’s a depressing chart, one might think. Except it’s only five days of data.

Let’s take a step back and look at how ether has been trading against bitcoin since the early days of human existence.

The bottom Chain Beacon and other ratios

The Beacon Chain, with its eventual Ethereum merger, was launched on December 1, 2020. At the time, ether cost 0.0313 BTC. As such, it has more than doubled in value since then.

Ethereum/Bitcoin monthly chart (TradingView)

Ethereum/Bitcoin monthly chart (TradingView)

Still, that says nothing about institutional interest. After all, prices can move based entirely on retail interest.

Trying to estimate institutional interest can be a bit tricky. For example, the use of futures volumes is not as clear as one might expect. We see that on a dollar volume ratio, ether futures have been consistently outperforming bitcoin futures since July, according to data from Skew.com, although it has taken a hit recently.

ETH/BTC futures volume (TradingView)

ETH/BTC futures volume (TradingView)

That doesn’t tell us much about institutions because some of the exchanges Skew uses for data cater to retail investors with a high risk tolerance.

There is, of course, at least one futures exchange that can be a good proxy for Wall Street’s interest and that is the CME. There is a big difference between the volume ratio between the two cryptocurrencies:

ETH/BTC CME futures volumes (TradingView)

ETH/BTC CME futures volumes (TradingView)

The CME’s ratio of ether to bitcoin futures is definitely all over the place, but the dollar amounts of the ether contracts on the CME are clearly still not higher than the bitcoin futures contracts.

Read more: Ethereum Merge Ties Ether Futures Activity to Staking Yield, Traders Say

In the spot market, however, exchanges themselves can understand the players who are interested in a currency.

“In terms of the volume increase in ETH this week, it was led by institutions, and that’s a significant part of our exchange business,” Bobby Zagotta, CEO of Bitstamp USA, said on CoinDesk TV’s “First Mover” program on Friday. There was an increase of about 56% in the amount from institutions against, I think, [a] 35% increase in volume from retail users.”

Much of that, Zagotta said, could be attributed to investors “selling the news” to the success of the Combination.

Quiet before the rally?

Meanwhile, the fall in the price of ether did not occur directly against bitcoin; it happened against the US dollar as well. While HODLers were disappointed last week this fall, there are people who aren’t giving up much down the road.

Matthew Sigel, VanEck’s head of digital asset research, compares ether’s performance against USD after the Merger to what happened to bitcoin after significant changes.

“There are many examples of major crypto developments, including the bitcoin boom, where the price traded in a range of weeks or months,” Sigel said on CoinDesk TV’s “First Mover” program Thursday. “Only one major stakeholder needs to decide to buy after some stability in the network. That may take days, weeks, months – who knows?”

Read more: SEC’s Gensler Signals Additional Scrutiny for Proof-of-Stake Cryptocurrency: Report

Sigel, who has a five-year price target for ether of $8,000, noted that four times more ETH had been staked on the Ethereum network in the six hours following the Merger than in the entire previous history of the Beacon Chain.

“It’s pretty clear that the people in the markets are now making the decision to commit and lock in that liquidity,” he said. “That’s likely to be a trend that will continue over time, so I think the initial results are quite encouraging despite the price action.”

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