merge effect? Ethereum (ETH) surges 50 percent in a week

54 percent in one week: Gradually the switch seems to be flipping on Ether. The on-chain data is encouraging, especially since the Ethereum Merge is yet to come as a major event. However, the brief price flare should be taken with caution.

Ethereum demand increases

Probably also because of temptingly cheap entry opportunities, there has recently been an increasing demand for ether among small investors. According to the blockchain analysis company Glassnode, the proportion of those who own at least one ether has increased steadily in recent weeks. The Ethereum network currently has over 1.5 million such addresses – a record high.

Favorable buying opportunities are also being sensed among large investors. Since the beginning of May, the number of addresses managing between 1,000 and 100,000 ether has fallen by 131 increased to 6,600.

Stock market stocks fall

As a result, the supply side is shrinking – the ether stocks managed by exchanges are decreasing. At the beginning of July they were still at 21.8 million. In the meantime, the supply has dropped by one million to 20.8 million ethers.

Traffic is coming back

At the same time, network activities in the form of transactions made are picking up speed again. A low for the year was reached on June 26 with 870,000 transactions. Less than four weeks later, there are again well over a million transactions on Ethereum.

Waiting for the Ethereum merge

The consensus move from Ethereum to Proof of Stake should also cause movement. After renewed delays, September 19 is the provisional date – still on shaky ground. “The Merge”, the point at which Ethereum switches to the eco-friendly consensus process, could trigger a price rally in advance, as is often seen with network upgrades.

Apart from the staking itself, an investment opportunity that generates returns on deposited ethers, the merger will not initially change anything for investors. Scaling solutions that make the blockchain more powerful and therefore cheaper will only be integrated in further development phases. At that point at the latest, the attractiveness of Ethereum for the NFT and DeFi market will increase again, parts of which have switched to alternative blockchains due to excessive fees.

Just a flash in the pan?

The “merge effect” could also fizzle out immediately. Likewise the currently increasing demand among investors. While the on-chain data looks tempting at first glance, it would be wrong to derive a longer-term trend from it.

Outliers can be deceiving. In the highly volatile crypto market in particular. In view of the globally shaky financial markets and the triggers for them, larger setbacks cannot be ruled out. Ether was the first to regain some breathing room with a gain of $500 in a week, but it will take a lot of staying power to get back into regions of $3,500 like it was in early April.