Why institutions quickly got high interest in Ethereum

It’s fair to say that Ethereum is no longer playing Bitcoin’s second violin. Although there might be a huge gap between their market capitalizations, group interaction is almost the same, with Ethereum often taking centre stage as well.

In the light of increasing institutional participation and accredited investors showing interest in crypto-exposure, Ethereum is definitely beginning to blur a few feathers.

CME Ethereum Futures demand is high off the bat

In fact, the size of the most recent institutional demand for Ethereum can be observed by the activity reported by the newly launched ETH CME Futures.

According to Glassnode, the day-to-day trading volume grew to a total of $75.8 million on 16 February, nearly doubling the volumes reported on 12 February, which was about $40 million.

There have also been other influential indicators. In a recent interview, Meltem Demirors of CoinShares indicated that by the beginning of February, Ethereum’s investment products had a cumulative inflow of 80 per cent, worth around $175 million, with such institutional support never seen before.

Coinbase’s annual review of 2020 also offered a similar narrative. In the same vein, the crypto-exchange indicated that a rising number of its institutional clients are taking a position in Ether, with these particular clients having mainly purchased Bitcoin in 2020.

ETH continues to fall on exchange wallets

Ki-Young Ju, CEO of CryptoQuant, has recently shed some light on three major ETH outflows experienced last year. He hypothesised that these could be OTC offers for institutional investors, close to the Coinbase outflows. Young Ju might not be far from being right.

Over time, the amount of Ethereum kept on the exchanges has declined steadily, reflecting the same hodling sentiment common to Bitcoin.

Thank you, Bitcoin?

If the institutional market for Bitcoin is considered, it took almost a year for accredited investors to take it seriously. There was a lack of strong interest in the first few months, but for Ethereum, the growth was substantial right off the bat.

Timing was extremely critical. From a floor price of $77 in March 2020, Ethereum is currently priced at more than $19.00 in less than a year. The crypto-asset had a more dominant bullish rally than in 2017, and now crypto-exposure is even more amiable than before. Finally, Ethereum has strengthened its stock with the successful launch of ETH 2.0 phase zero and a large increase in DeFi over the past year.

But here, too, Bitcoin deserves a lot of credit. Until the certified investors were happy with Bitcoin, there was no hope that they would move to Ethereum. From a realistic point of view, Bitcoin led the charge for institutional exposure and now companies are looking at the next most valuable digital asset, i.e. Ethereum.