Crypto Markets May Have Finally Hit Their Floor. Does This Mean It's Time to Buy?

The roller coaster ride that is crypto keeps going.

Over the last few years, the cryptocurrency market has seen some very high highs -- and some very low lows. Multiple coins peaked last fall, with Bitcoin (BTC) topping $68,000 a coin, and Ethereum (ETH) valued at over $4,600.

Then came the summer crash. Many mainstream cryptos tanked, with even Bitcoin hitting its lowest point since 2020, dropping below $20,000 a coin. Total market value of cryptocurrencies fell below $1 trillion for the first time since early 2021.

Now the crypto downturn may be over. Major currencies Bitcoin and Ethereum have both seen recent jumps, and total crypto market value has inched its way back above the $1 trillion mark yet again.

It seems that analysts are -- cautiously? -- optimistic. Last week, JPMorgan analyst Kenneth Worthington was quoted in a note to clients saying, “It appears that the crypto markets have found a floor despite trading volumes still being depressed."

A crypto bounce back

Experts are citing a number of sources for the recent turnaround in the crypto market. That general optimism is, in itself, a potential reason for market improvements; a speculative investment like crypto often rallies on positive market sentiment.

Some of that optimism seems to be coming from the dissipating aftereffects of Terra's May collapse. The stablecoin's failure had broad effects that spread across multiple currencies and had a negative impact on the overall crypto market.

According to JPMorgan, however, the real driver in the recent upturn "has been the Ethereum merge and positive data following the launch of the Sapolia testnet in early July and Ropsten testnet in June, indicating the merge is viable in 2022."

The highly anticipated Ethereum upgrade has been in the works for years, and will shift the popular blockchain from a proof-of-work to a proof-of-stake network. The latter system is considered to be faster and more energy-efficient.

Analysts expect the merge to take place in September. If successful, it should be a boon to crypto markets and may help boost still-depressed values.

Is it a good time to buy?

As a general rule, buying low is better than buying high when it comes to long-term and speculative investments. In that regard, now could very well be an excellent time to jump into the crypto market. Prices are still well below their 2021 peaks, with Bitcoin trending around the $24,000 mark and Ethereum hovering below $2,000.

If crypto has truly hit its floor, as JPMorgan predicts, then there's nowhere to go from here but up. And a successful Ethereum merge in September could be the catalyst to a strong comeback this fall.

However, as optimistic as the analysts may be, there's no guarantee that crypto is out of the woods yet. If the Ethereum upgrade fails for some reason, all that optimism could evaporate.

Then there's the worldwide energy crisis that is still impacting markets -- something that is likely to get worse as winter hits the Northern Hemisphere. Additionally, while inflation saw a small drop in July, it's still well above average. This, paired with recent Federal Reserve activity, has no doubt made investors leery of getting back into high-risk investments like crypto.

There's also the ever-present danger of increased regulation. Congress is weighing in on the future of crypto, and there's no telling what impacts that could have on an already tenuous market.

All in all, it's hard to say whether crypto has truly hit its bottom. There's always the chance that it will fall back down -- or, worse, sink even further. Whether that's worth the risk depends on your own tolerance.