Analysts at JPMorgan now assert that optimism among individual investors in cryptocurrencies is on the rise, with a brighter market forecast following extreme downturns.

JPMorgan revealed in a research released on Friday that it expects retail demand for cryptocurrencies to increase. The bank added that the severe phase of deleveraging brought on by falling digital currency prices and deleveraging by prominent lenders is also coming to an end.

Following months of prolonged dips, the global market capitalization for cryptocurrencies has surpassed $1 trillion, with small advances. Consequently, investors are closely monitoring the market for the next price movement.

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Crypto ‘Backwardation’ Has Ended?

JPMorgan stated that the significant “backwardation” experienced in May and June, the most extreme since 2018, appeared to be over.

In recent weeks, crypto markets have rebounded as investors anticipate the Ethereum “Merge,” the blockchain’s September 19 switch to a proof-of-stake (PoS) consensus process.

Image - Bitcoin.com

Bitcoin (BTC) and Ethereum (ETH) values have increased by 31% and 73%, respectively, since reaching record lows of $17,600 and $876 last month.

As of this writing, Bitcoin is trading at $$23,335, up 14% in the last seven days. Ethereum is trading at $1,631, climbing 37%, also in the last seven days, data from Coingecko show, Friday.

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These advances are the result of an increase in optimism among bitcoin investors over the possibility of an inflation slowdown and the health of consumer spending.

After last week’s statement that “Merge” would be launching mainnet in two months, investor expectations soared.

As the market capitalization of all digital currencies surpassed $1 trillion, the purchasing pressure surrounding the enthusiasm for the largest smart contracts platform in the cryptocurrency industry spread to the rest of the market.

Crypto total market cap at $1.05 trillion on the daily chart | Source: TradingView.com

Crypto Prices Soar As Well

Additionally, the bank emphasized that the current market relief bounce was not caused by futures or institutions. Thus, JP Morgan believes that retail demand for cryptocurrencies is increasing, causing token prices to rise as a result.

In addition, the bank observed that the resurgence of regular investors is reflected in the rising Bitcoin and Ethereum holdings by smaller wallets relative to whales. JPMorgan reported that Ethereum network traffic has surged in tandem with an improvement in investor mood.

The New York-based lender also pointed out that the recovery in staked ether (stETH) is a strong indicator that the deleveraging event that destroyed crypto firms such as Terra, Celsius, and Three Arrows Capital has ended.

The recent research provided by JPMorgan is a bright ray of hope in otherwise grim conditions, as macroeconomic fears of an oncoming recession are causing anxiety in the sector.

Featured image from Times of India, chart from TradingView.com