"The extreme phase of backwardation seen in May and June, the most extreme since 2018, appears to be behind us," the bank said.

Crypto markets havebounced backin recent weeks as investors anticipate the Ethereum "Merge," the blockchain's transition to aproof-of-stakeconsensus algorithm that is set to commence on Sept. 19.

Ethereum network activity has increased alongside an uptick in investor sentiment, JPMorgan said.

Bitcoin (BTC) and ethereum (ETH) are up 30.82% and 72.86%, respectively, since diving to lows of $17,600 and $876 in June.

The recovery in asset prices is not seen in the crypto fund or futures space, indicating that demand is driven by retail investors, JPMorgan said, before adding that "smaller wallets have seen an increase in ether or bitcoin balances since the end of June at the expense of larger holders."

The bank also notes therecovery in staked ether(stETH), a token from the Lido protocol that is supposed to trade at a price close to ether, as an example of how the deleveraging event that ravaged companies such asThree Arrows Capital,TerraandCelsiusis now over.

Staked ether dropped to aratio of 0.94 to 1 in Junefollowing an unwinding of large quantities triggered by thecollapse of Terra.