Smart Money Has Been Buying the Ethereum Merge Narrative

Institutional investors and whales are buying and staking ether as the Merge’s success appears likely


Source: DALL·E


key takeaways

  • Nansen’s Merge report showed smart money ether holdings rising since June
  • “Ethereum is taking over and smart money is jumping ship [away from Bitcoin] quickly,” a digital asset investor said

Crypto’s largest investors have been buying ether ahead of the Merge.

Ethereum’s upgrade from proof-of-work to proof-of-stake is imminent, and investor jitters along with potential forked ether tokens have led to outflows of ether from lending platforms in recent days. But institutional investors and deep-pocketed “whales” have accumulated ether and staked it in recent weeks, signaling confidence that the Merge will be successful.

Nansen researchers noted a steady buy trend since mid-August among whales and “smart money” alike. The blockchain analytics platform defines smart money as crypto traders it considers “experienced, well informed or ‘in the know’” — such as funds and large liquidity providers.

Ether holdings on the rise since June; Source: Nansen Merge Report

It’s unsurprising that investors who already own large amounts of ether are bullish on Ethereum’s Merge. But it appears that institutional investors across crypto see a buying opportunity.

“I’ve seen today, for example, a major fund [which is] one of our investors buying Coinbase staked ETH at a discount,” Will Harborne, CEO of the crypto exchange, said, adding he finds fears of fork-related turmoil following the Merge “boring.”

“The Merge is going to be successful. It’s definitely going to be really smooth,” Harborne said.

Smart money may be more fearful of the broader macro environment than of software bugs, especially as the latest US inflation figures came in higher than expected. The Merge has created a perception that ether is the safest bet in the bear market, according to Max Williams, chief operating officer at Runa Digital Assets.

“Given the macro backdrop, [the Merge] is the best catalyst” for crypto, Williams told Blockworks. “In the bear market, [traditional wisdom says] hold onto the safest assets, which has really meant bitcoin, but [ether] is taking over and smart money is jumping ship quickly.” 

Ethereum post-Merge still faces a shaky macro outlook, and Williams predicts staked ether yields will fall over the next year, barring a dramatic rise in activity on the Ethereum network. 

But smart money evidently still finds proof-of-stake Ethereum worth the risk.

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