Post Merge: Ethereum Investors Act With Caution (Report)

The Merge, one of the biggest upgrades in the cryptocurrency industry, turned into a sell-the-news event. While the long-anticipated transition did not light a fire under the Ether’s price, many experts believe it would offer some strong tailwinds in the future.

Nevertheless, investors are treading with caution. The figures come amid a relatively low activity week as a mixture of positive and negative flows by providers and assets continued to demonstrate a lack of engagement amongst investors at present.

According to the latest edition of Digital Asset Fund Flows Weekly, CoinShares’ reported that the flows aftermath of the Ethereum Merge flows indicated continued caution amongst investors. As such, the 4th week of outflows equaled $15 million, while the total numbers since the beginning of the year stood at an astonishing $375.8 million.

However, the run of outflows has been quite minor and was recorded at $80 million.

Investors Remain Cautioned

After years of delays and setbacks, Ethereum finally transitioned to a Proof-of-Stake network rather smoothly. Data reveals that the amount of staked ETH has been on a consistent uptrend while network participation also remained high. Client diversity was also trending in the right direction. So far, there is no noticeable hitch on the technical side of things.

The entire staking process theoretically presents bullish prospects for the crypto-asset. The circulation is expected to drop in the form of a fee that needs to be paid to the network to execute transactions. Subsequent holders turning to stake may also remove ETH from circulation, and the asset could go deflationary as the scarcity begins to weigh on the token’s circulation. Despite this, institutional investors remain skittish.

One of the biggest factors could be scalability. While the Merge was a watershed moment, Ethereum is still far from implementing a sharding solution to scale up network speed dramatically despite achieving crucial goals such as energy consumption problems and reducing carbon emissions.

Next in line with a series of improvements is “the Surge” to a more secure and decentralized network. The upgrade involves making transactions cheaper by dividing them across several different chains in a way that is designed to decrease fees while speeding them up.

By the end of Verge, Purge, and Splurge upgrades, Ethereum will be able to process 100,000 transactions per second, according to Vitlaik Buterin. But that would take a great deal of time. For instance, the Surge alone is not in the pipeline this year.

Lucrative or Not?

Ethereum’s scalability upgrades scheduled for next year do not necessarily make it less lucrative. In fact, Ethereum being more eco-friendly will pave the way for traditional corporations and large financial institutions to engage more in the staking opportunities.

Additionally, a PoS Ethereum validator can receive about a 5% annual percentage yield (APY) which makes it quite an attractive revenue stream given the relatively low risk associated with it.

Fidelity Digital, in a recent report, noted,

“Ethereum’s shift to proof-of-stake makes Ether an asset that can earn interest for holders in the form of staking. This yield generation has the potential to increase the total return for ether holders and may make the asset more attractive to prospective investors.”