The expectation of the Merge, a long-awaited improvement to the Ethereum network, is the primary factor for the recent rebound in cryptocurrencies, according to JP Morgan, which thinks the market has found its bottom despite low trading volumes.

Bitcoin (BTC) and Ether (ETH) have increased by 35% and 101%, respectively, since their mid-June lows, and the overall market value of cryptocurrencies has regained $1 trillion, according to data from CoinMarketCap.

In a Monday note to clients, JPMorgan analyst Kenneth Worthington primarily ascribed the shifting economics of the cryptocurrency market to the planned Ethereum Merge that will switch the blockchain from Proof-of-Work (PoW) to Proof-of-Stake (PoS).

Worthington said:

“What has helped, we believe, has been more limited new contagion from the implosion of Terra/Luna.”

Successful Ethereum Merge A Boon To Crypto Markets

Nevertheless, the JPMorgan analyst believes the real impetus 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 merge is feasible in 2022.

“Despite trade volumes remaining down, it looks that cryptocurrency markets have found a floor,” Worthington disclosed.

JPMorgan stated that a successful Ethereum unification later this year will help bolster investor confidence.

The integration is anticipated to occur 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 final steps prior to the merge.

Ethereum's successful integration later this year, according to JPMorgan, is expected to help boost investor confidence. Image: Analytics Insight

PoW To PoS Sending Positive Vibe

The price of Bitcoin increased by 20% in July, while the price of Ethereum increased by roughly 60% compared to May, on the back of encouraging news regarding the cryptocurrency’s shift from PoW to PoS; the system is intended to increase the network’s 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 in November of last year.

In July, Decentralized Finance also increased by 22%, and Worthington pointed out that:

“Considering that DeFi tends to be constructed on Ethereum, the alleviation of early concerns about DeFi and the better news regarding the Ethereum Merge are likely behind the exceptionally large price rise of ETH in comparison to bitcoin.”

As crypto investors seek a much-needed boost in confidence, the long-term revival of the cryptocurrency market may be dependent on the imminent 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