According to a Bloomberg Intelligence report, The Merge update, from which it will take Ethereum consent mechanism from proof of work to proof of stake, it will play a key role in the institutional adoption of the network.
The report also highlights that Ethereum’s growth will depend on its potential as a social and economic tool. Currently, the signs are quite auspicious as the total ETH locked in smart contracts has increased 1.4% in three years.
Although non-fungible tokens (NFTs) are experiencing some decline, Bloomberg believes they could take the place of stablecoins and decentralized finance (DeFi).
The emergence of new use cases has also strengthened Ethereum’s on-chain activity from the latest bear market. However, stablecoins and DeFi have been severely tested by the liquidity crisis that has hit some of the largest cryptocurrency companies, forcing some to file for bankruptcy.
In a report released in mid-July, fund manager CoinShares revealed that institutional investors had invested $ 7.6 million in Ethereum-based products in three weeks.
Today, there are several funds offering exposure to Ethereum, including Grayscale Ethereum Trust which manages the portfolios of large institutional investors such as Rothschild Investment Corp, Weatherbie Capital LLC, and Rye Brook Capital LLC.
Despite its success, the blockchain is not immune to criticism. Last month, Vitalik Buterin returned fire from Ethereum critics who falsely claimed that network changes were governed by governance votes.
Ethereum makes Bitcoin swoon
The report also highlights that Ethereum may be undervalued, particularly after the peak on May 21, 2022. Furthermore, the asset outperformed Bitcoin’s performance on three main on-chain indicators, namely: active users, addresses with a balance. positive and volume of transactions.
Indeed, Bitcoin has been hit hard by Federal Reserve policy and is unlikely to recover before interest rates stabilize. Its price, however, remains five times higher than the March 2020 low.
The number of Ethereum addresses with positive balance increased by 113% compared to 2019. In contrast, the number of active Bitcoin addresses decreased by 30% compared to the same year. On July 26, 2022, the 7-day moving average of active users on Ethereum increased by 46% (180,000 users) from the previous month. Finally, despite a 29% drop in Ethereum’s price, its transaction volume decreased by 7%.
Towards multi-asset tokenization?
Having thrived in 2020 and 2021, cryptocurrencies appear to be heading towards futures and exchange-traded funds.
Just like futures, tokenization can provide exposure to certain assets without investors buying them. However, this technology could face many legal and technical hurdles. The report, however, believes that the mere fact that Tether and USDC are hosted on Ethereum demonstrates the value of blockchain technology.
By the end of 2022, Ethereum will adopt a deflationary issuance system. It could also offer 6-9% returns on staking assets. That said, all of this will only be possible if The Merge update delivers on its promises.
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