A new report from Bloomberg Intelligence finds that Ethereum could become worthy of an institutional investment after the Merger.
According to a report by Bloomberg Intelligence (BI), the upcoming Ethereum merger to change the consensus layer from Proof-of-Work to Proof-of-Stake is likely to be a critical factor in accelerating institutional-grade investment.
The report further suggests that Ethereum’s growth will depend on its strength as a social and economic tool.
There seem to be promising signs, as the total ETH locked in smart contracts has increased by 1.4% in three years. While NFTs have experienced a temporary hiatus, BI believes they have the potential to displace stablecoins and decentralized finance activity.
Broadening of use cases has strengthened Ethereum’s activity on the Blockchain, compared to the previous bear market. Both stablecoins and DeFi have been challenged by the liquidity crisis at some major cryptocurrency firms that have filed for bankruptcy or halted withdrawals.
In mid-July, fund manager CoinShares published a report saying that ETH inflows were on a three-week streak, with $7.6 million going to institutional investors.
Grayscale Ethereum Trust offers institutional investors exposure to Ethereum. The main institutional holders of the Trust are Rothschild Investment Corp, Weatherbie Capital LLC, and Rye Brook Capital LLC.
Last month, Ethereum co-founder Vitalik Buterin responded to critics who falsely claimed that Ethereum code changes are decided by a governance vote.
Ethereum outperforms Bitcoin on key metrics
The report suggests that Ethereum could be mispriced, considering the recovery from a peak on May 21, 2022.
Ethereum has also outperformed Bitcoin in three vital on-chain metrics: active users, non-zero balance addresses, and transactions.
Bitcoin has been hit by rate hikes by the Federal Reserve and is likely to continue to follow stocks lower if these announcements continue. However, it is still five times above the March 2020 low in early August 2022.
Active Ethereum addresses with non-zero balances are at an all-time high. These have mostly remained flat compared to a year ago, but are up 113% compared to three years ago, outperforming Bitcoin.
The number of active Bitcoin addresses decreased by 30% in the same period. On July 26, 2022, the 7-day moving average of active users increased by 46%, or 180,000 in a month. Ethereum transfer volumes are down 7% despite a 29% price drop.
Tokenization: Clear Possibility
According to the report, crypto assets appear to be going the way of futures and exchange-traded funds (ETFs), having put an end to the heady days of 2020 and 2021.
Similar to how futures contracts provide exposure to assets without requiring the investor to own the asset, there is little stopping the tokenization of all types of assets, except perhaps technical and regulatory hurdles.
The report highlights the fact that Tether and USDC are made possible by Ethereum attests to the value of Blockchain technology.
By the end of 2022, Ethereum could offer staking returns of 6% to 9%, with a deflationary issuance pattern, the report adds, as long as the Merger occurs within that time period.
By Audy Castaneda