Ethereum, the largest altcoin in the crypto market, was one of the best performers of the year. The ETH rose in the price charts by almost 400%. While the extent of its price spike has, perhaps understandably, caught most of the eyeballs, the surge in institutional interest that Ethereum has seen has gotten under the radar.
CME sees green
Keep the following in mind: Within the first seven days after CME launched Ethereum Futures, new contracts worth a little over $ 23 million were traded. On the contrary, according to a recent report by OKEx Insights, “partial data for the week ending April 25th shows weekly volume hits an all-time high of $ 353 million – over 166% more than the high of $ 132.57 million. Dollars from the week before. “
In addition, the OI of CME Ether Futures has increased at a similar pace.
“In its first month of trading, ETH Futures had an average open interest of USD 61.17 million. The March numbers showed a significant spike in activity, with average open interest rising to a high of $ 101.67 million. “
In fact, the numbers had climbed to $ 205.6 million as of April 21st, reflecting the amount of institutional money that has found its way into the Ethereum market in recent months.
What contributed to institutional interest in Ethereum growing as it did this year? Well, this is where a few factors come into play. However, before we get into each and every one of them, it should be emphasized that the introduction of Ether Futures by CME and its success is not the only tool to measure the level of institutional interest in ETH.
For example, in December 2020, 3iQ listed the Ether Fund on the Toronto Stock Exchange. A few months later, CoinShares’ physical Ethereum went online, prompting Galaxy Digital to raise $ 32 million to launch two separate Ethereum funds.
The surge in ETH-based exchange-traded products, like the above numbers for CME Ether Futures, is evidence that Ethereum has become an increasingly attractive investment option for institutional investors.
Now back to the above question: what sparked institutional interest in Ethereum over the past year?
Why institutions love Ethereum now
According to OKEx Insights, one of the most important factors has been the normalization of cryptocurrency investing in the mainstream. The report argued that this was a by-product of MicroStrategy, MassMutual and Tesla’s entry into the cryptocurrency space, each of which legitimized a sector that has long struggled to shake its reputation on Wall Street.
This is something that Bitcoin is also struggling with. However, unlike Ethereum, BTC is a “finished product” while Ethereum is still in a long upgrade. The fact that institutions trust Ethereum so early on in their roadmap is a big deal and applies to its future fate.
What else? Ethereum’s growing use cases are another factor as well, as the growth in decentralized funding has been doing the trick for a year now. Thanks to this, the use of the network with the same fuel requirement has also increased for ETH. According to Rick Delaney,
“… Many who speculate about the ETH price do so with the expectation that future network use will increase the value of their investment.”
Finally, it can be argued that the transition to Ethereum 2.0 not only encourages price hikes, but also encourages institutional interest in the cryptocurrency. While the implementation of EIP-1559 is expected to “act as a positive feedback loop for the price of ether,” the fact that some stakeout services intended solely for accredited institutional investors are being rolled out is a sign of how the latest are Ecosystem-oriented updates are carried out by institutions at their expense.
Too good to last
Is this the prevailing trend now? Will institutional interest in Ethereum keep growing every week?
Well, it can be argued that the long length of time associated with Ethereum’s upgrades “may temporarily curb institutional appetite,” with ETH currently being more of a “speculative game” than BTC. This, and the fact that other blockchain networks have emerged lately to challenge Ethereum suggests that the future may be more uncertain than expected.
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