Crypto markets have “hit the floor,” says JP Morgan, as Bitcoin nears $24,000
Anticipation of the merger, a long-awaited improvement to the Ethereum network, is the primary factor behind the recent rally in cryptocurrencies, according to JP Morgan, which believes the market has bottomed out despite low trading volumes.
Bitcoin (BTC) and Ether (ETH) are up 35% and 101%, respectively, since their mid-June lows, and the total market capitalization of cryptocurrencies has regained $1 trillion, according to data from CoinMarketCap.
In a Monday note to clients, JPMorgan analyst Kenneth Worthington attributed the changing economics of the cryptocurrency market primarily to the planned Ethereum merger that will switch the blockchain from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
Worthington said:
“What has helped, we think, has been more limited new contagion from the implosion of Terra/Luna.”
Successful Ethereum merger a boon to crypto markets
Still, the JPMorgan analyst believes the real driver has been the Ethereum integration and favorable statistics following the unveiling of the Sapolia and Ropsten testnets in early July and June, indicating that the merger is feasible in 2022.
“Despite trading volumes remaining down, cryptocurrency markets appear to have found a floor,” Worthington revealed.
JPMorgan stated that a successful Ethereum unification later this year will help boost investor confidence.
The integration is expected to take place in September, pending the performance of the next Georli testnet. This test is scheduled to take place on August 11 and is one of the last steps before the merger.
Ethereum's successful integration later this year, according to JPMorgan, is expected to help boost investor confidence. Image: Analytics Insight
PoW to PoS sends positive vibes
The price of Bitcoin increased by 20% in July, while the price of Ethereum increased by approximately 60% compared to May, on the back of encouraging news about the cryptocurrency’s transition from PoW to PoS; the system is meant to increase network speed and mining efficiency.
In addition, JPMorgan observed that the capacity of Bitcoin and Ethereum to rise since June’s lows is another indication that the market has reached a bottom. Bitcoin’s price has fallen by over 60 percent since its all-time high of nearly $68,000 last November.
In July, decentralized finance also increased by 22%, and Worthington pointed out that:
“Given that DeFi tends to be constructed on Ethereum, the easing of early concerns about DeFi and the better news regarding the Ethereum merger are likely behind the exceptionally large price increase of ETH compared to bitcoin.”
As crypto investors seek a much-needed boost in confidence, the long-term revival of the cryptocurrency market may hinge on the impending Ethereum merger.
BTC total market cap at $444.9 billion on the daily chart | Source: TradingView.com Featured image from The Spruce, Chart from TradingView.com
