These are the institutions buying Ethereum when the price dips

Posted: 19 March 2021 4:36 pm

Despite Ether's growing pains, institutions have continued to accumulate the premier digital asset, with Asian tech firm Meitu buying a cool 16,000 ETH on March 17

  • The last seven days have seen Ethereum stay bound between the AUD$2200 - AUD$2,300 price range.
  • According to a report released by Coinshares, over 50% of the funds that made their way into the crypto market last week can be directly traced to various ETH-related investment products.
  • Experts believe that the ongoing standoff between Ether's mining and dev community could potentially turn ugly if a resolution isn't agreed upon in the near term.

Over the course of the last 24-hours, Ether, the world's second-largest cryptocurrency by total market capitalization has continued to showcase increasing downward monetary action, with the asset slipping from AUD$2,340 to under AUD$2,260 within the previous 12-hr trade window, thus showcasing a daily loss ratio of around 5%. At press time, ETH is trading at $2,316.

It is worth mentioning that on March 18, Ether failed to beak out once again in relation to Bitcoin, especially as the flagship crypto gained a cool 8% for the day while ETH's value stayed put. This seems to once again suggest that investor confidence in the premier altcoin may be dwindling, especially as rising gas fee concerns have not been adequately met by the currency's dev team even though a number of upgrades — Berlin, London, and EIP 1559 — are looming large on the horizon.

To gain a better understanding of how Ether's Berlin upgrade — which is slated to go live during the second or third week of April — stands to fix the network's growing congestion problems, Finder reached out to Winston, a moderator for Harvest Finance, a leading yield farming aggregator. In his view, the upcoming network overhaul does not stand to change things in any big way, adding:

"Personally I think we see minimal fee reduction, if any, with the upcoming Berlin upgrade. There are a few EIPs included that can help users save gas but there is also EIP-2929, which actually increases fees in some transactions. I think that for now, the best way to save on gas is going to be by farming on other chains or by using protocols running on L2."

The exact same outlook is shared by Gunnar Jaerv, chief operating officer for First Digital Trust, a digital asset custody platform, who believes that the upcoming Berlin Upgrade, though scheduled with all the right intentions, may not be able to change much of what's going on with the Ethereum main-net. He added:

"The London upgrade, which is scheduled three months after Berlin (around July) in theory would be good for Ethereum to offset Gas fees and Congestion. Whether this will work is another discussion."

Institutions buy the dip

As Ether's value continues to struggle, Meitu, a Hong Kong-based tech company, released a statement on March 17 claiming that it had acquired a total of 16,000 ETH worth around US$30 million which is the company's second ETH purchase in recent times — with the last one being worth US$22.1 million (approx 15,000 ETH).

As a result of its most recent crypto acquisition, the Asian software firm now has in its coffers a total of 31,000 ETH. Furthermore, it should also be pointed out that Meitu is also an active investor in Bitcoin, with the company acquiring 386 BTC as part of its March 17 crypto haul.

Also worth noting is the fact that over the course of the last ten odd days, ETH-related investment products attracted a whopping US$113 million, a figure that accounts for nearly fifty percent of all the money that came into the crypto market over the course of the last fortnight.

To further elaborate on this point, we can see that as per an all-new report released by digital asset management firm CoinShares, institutional investors are accumulating Ether at a growing pace, with Grayscale still in possession of the largest sum of ETH amongst all institutional buyers, with the firm adding 48,000 Ether to its portfolio over the last month.

Could Ethereum's dev - miner standoff turn ugly?

As pointed by Finder recently, following the introduction of EIP 1559, a proposal that seeks to mitigate Ethereum's existing network congestion but at the same reduces miner rewards by a staggering 50%, the currency's mining community got together in a show of strength to express their displeasure with the proposed upgrade — even threatening a peaceful 51% network takeover. Providing his thoughts on the brewing controversy, Winston opined:

"As far as the current standoff between the miners and developer community, I do think this has the potential to escalate quickly and possibly get ugly. With Vitalik suggesting a quick merge with Ethereum 2.0, I think the miners likely see that the leverage they hold is quickly fading. It will be very interesting to see how it all plays out, never a dull day in crypto."

Similarly, Jaerv highlighted that the upgrade is one that seems completely lopsided since it cuts miner revenue in such as large way that it would make it difficult for most individuals to continue their mining operations in any sort of tangible manner. He added: "Of course miners will not be happy. About 40% of Miners revenue come from transaction fees and with EIP 1559 potentially implemented, revenues will decrease drastically."

He opined that if things reach a tipping point, we could potentially see the Ether chain undergoing a hard fork and being split into two. That being said, only time will tell how things play out from here on end.

Interested in cryptocurrency? Learn more about the basics with our beginner's guide to Bitcoin, dive deeper by learning about Ethereum and see what blockchain can do with our simple guide to DeFi.

Disclosure: The author owns a range of cryptocurrencies at the time of writing

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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