Ethereum Merge Fears Trigger Outflows in Crypto Investment Products

Start Trading

The impending Ethereum merger has caused concern among institutional investors as the digital asset industry sees a surge in outflows of ETH from exchanges.

Crypto Investment Products Plunge Amid Ethereum Merge

CoinShares’ Digital Asset Fund Flows Weekly Report shows the number of outflows from exchanges.

According to the report, crypto investment products experienced outflows totaling $63 million in the previous week. ETH-related outflows accounted for $62 million of this total.

The report added that digital asset investment products experienced outflows of US$63 million. Ethereum was the main focus of the withdrawals, totaling US$62 million last week. 

It goes on to say that the week’s performance is weak compared to previous weeks’ moves. This marks the fifth week in a row that crypto funds experienced outflows. It also mentions that the outflow “may reflect investor concern that the Merge will not go as scheduled.”

As per the regional overview of outflows, Canada and the United States were the most significant contributors over the past five weeks. 

They have a total of $60 million and $10 million, respectively. Like ETH, Bitcoin (BTC) funds have been on a five-week run of successive outflows.

Uncertainty Looms

Beyond this, the Merge appears to be sending panic into the crypto market. The ETH token is currently in what is called “merge jitters.” As reported by Bloomberg, as the merger approaches, more traders are short-selling ETH in the derivatives market.

As a result, the funding rate of ETH has fallen to its lowest since July last year, veering steeply away from that of Bitcoin.

The downtrend is driven by many factors, including traders ensuring their long positions. 

However, analysts are optimistic that the Merge will go smoothly and shape the future of the service offering of ETH. In a recent report, the London-based ETC Group stated that it anticipates ETH to detach from the digital assets market for decades following the upgrade.

The crypto securities provider further noted that its optimism was hinged on the ETH’s August performance. For the first time in history, the ETH futures volume outperformed Bitcoin’s. This occurred when ETH futures volumes exceeded $1 trillion for the second time.

Will Ethereum’s Merge likely be a “Sell the News” Event?

The rising inflation in the United States has forced traders to dump the ETH, with the consumer price index (CPI) down on Tuesday. Moreover, the build-up to the Merge has been positive so far, but the latest turn of events is troubling for the second-largest cryptocurrency.

Meanwhile, the “sell the news” rumor gradually gained traction as traders envisioned an up-and-down price movement. This scenario happens whenever a significant change is expected, and Ethereum’s upcoming Merge drives market sentiment. 

Moreover, the CPI influences on the forthcoming Merge will determine the renewed interest in the token. Experts believe that ETH’s retail purchase will be low if there is a high interest rate.

The Ethereum community awaits the launch of the Merge and the outcomes in the crypto market.

Start Trading

Leave a Comment

1 Institute Trade Blog | All Rights Reserved 2022 | Disclaimer | ✉ Contact