Decentralised-finance investors are betting on Ethereum’s revamp to help thaw out the market’s more than two-months-long crypto winter. The DeFi sector, where investors earn yields by trading and staking cryptocurrencies without centralized intermediaries, has declined sharply following the collapse of the TerraUSD stablecoin, and as soaring inflation puts the Federal Reserve on a path of monetary tightening.
Fewer new issuances of Ether, a smaller carbon footprint and higher yields are among the upgrade outcomes that DeFi investors say will fuel an Ethereum rally and boost the industry. “Our DeFi fund has been risk-off the market all year and now for the first time we are risk-on because we have been accumulating Ether every single day,” said Wes Cowan, managing director of decentralized finance at crypto investment firm Valkyrie.
While the Merge is one of the most hotly anticipated events for crypto in 2022, the bullish sentiment around it is unlikely to spread to the broader market, where interest-rate hikes and a weak economic outlook have kept investors away from riskier asset classes. A potential security threat to Ethereum’s beacon chain earlier this week could also push back the timing of the Merge.
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