Crypto investment products suffer from Ethereum pooling moves, causing outflows
The upcoming Ethereum merger has created uncertainty among institutional investors. Despite the rise in the price of Ether (ETH), the native token of the Ethereum blockchain, the asset has been the main focus of outflows when it comes to digital asset funds.
The data was first highlighted by Coinshares’ Digital Asset Fund Flows Weekly Report. According to the report, crypto investment products saw outflows totaling $63 million in the past week. Outflows attributed to ETH accounted for $62 million of this amount.
“Digital asset investment products saw outflows totaling USD 63 million…Ethereum was the main focus of outflows, totaling USD 62 million last week, this comes despite the enhanced security of the merger,” the report said.
It adds that this week’s performance, while relatively small in size compared to other weeks’ movements, is the fifth consecutive week in which crypto funds have seen outflows. It also notes that the outflow “may highlight a concern among investors that the event may not go as planned.”
According to the regional distribution of the outflows, Canada and the United States were the biggest contributors with $60 million and $10 million respectively in the last five weeks. Like ETH, Bitcoin (BTC) funds have also been on a five-week streak of outflows.
Uncertainty in the ETH market beyond institutional investors
The ETH market has experienced “merger jitters” beyond just crypto fund outflows. According to data from crypto data firm Kaiko reported by Bloomberg, more traders are shorting ETH in the derivatives market as the merger approaches.
This has resulted in ETH’s funding rate dropping to its most negative since July 2021, diverging sharply from Bitcoin’s. The trend has been attributed to several reasons, including that traders may be hedging their long positions, or expecting the price of ETH to fall after the merger as a “sell the news” fall begins.
Regardless, analysts have expressed optimism that the merger will go smoothly and usher in a new era for the value proposition of ETH. ETC Group, a London-based specialist provider of crypto-backed securities, said in a recent report that it expects ETH to disconnect from the digital asset market in the long term after the upgrade.
ETC Group supports this optimism with the fact that in August ETH futures volume exceeded that of Bitcoin for the first time in the history of the crypto market. This also coincided with ETH futures volumes surpassing $1 trillion for only the second time in history.
