The Merge Opens Door To Ethereum Buying By Institutional Investors, Says Bank Of America

According to Bank of America Insights research, the anticipated Ethereum ETH/USD move to Proof-of-Stake may result in higher institutional adoption.

Despite not addressing issues with the blockchain's scalability or high transaction fees, Ethereum's transition to a proof-of-stake (PoS) consensus mechanism from a proof-of-work (PoW), known as The Merge, has implications that go beyond serving as a precursor for the next stage in the process, known as The Surge, the note said.

The Merge is the first stage of the five stage process, and lays the groundwork for The Surge, which adds ETH sharding, a scaling solution that will further enable affordable layer-2 blockchains, reduce the cost of rollups or bundled transactions, and make it simpler for users to run nodes that secure the Ethereum network.
Read more: ETH Merge – Underrated Or Priced In?

The notable reduction in energy consumption after The Merge may allow some institutional investors — like Shark Tank’s Kevin O’Leary — to purchase Ether for the first time, along with those who were barred from buying tokens that run on blockchains that use the PoW consensus mechanism, the report said.

“I got a ton of phone calls from compliance committees,” O’Leary said to Benzinga last year after allocating 3% of his portfolio to Bitcoin BTC/USD. “Where did the Bitcoin you own come from, where was it mined? It probably was mined in China, where they take coal and they burn it to generate electricity at an ever-increasing amount to mine Bitcoin.”

O'Leary will be among the featured speakers at Benzinga's two-day crypto event at New York City’s Pier Sixty, Dec. 7-8, 2022.

A higher-quality yield, according to Bank of America, also affects the Web3 ecosystem of decentralized applications (dapps).

“The ability to stake ETH and generate a higher-quality yield (lower credit and liquidity risk) as a validator or through a staking service rather than on block-box lending/borrowing applications may also drive institutional adoption,” Bank of America analysts said in the note.