While Ethereum’s recent network upgrade has generated a significant increase in transaction volume and active addresses, Wall Street bank JPMorgan is cautious about whether this momentum will be permanent.
In a note shared with its customers, the bank stated that the Fusaka upgrade, implemented in December, expanded data capacity, resulting in a rapid decrease in transaction fees and a sudden surge in network activity.
According to the report, Fusaka is built on top of the Pectra upgrade coming in early 2025. Pectra partially recovered mainnet activity, which had weakened as usage shifted to layer-2 (L2) networks after Dencun. However, JPMorgan analysts argue that similar recoveries in the past have faded over time. The team, led by lead analyst Nikolaos Panigirtzoglou, noted that successive upgrades on Ethereum have historically failed to sustainably increase network activity.
Fusaka expanded the network’s data capacity by increasing the number of blobs per block. This change aims to reduce transaction costs and increase throughput, especially in L2 instances that rely on the main chain for data availability. The ability to write more data per block alleviated the bottleneck that emerged after previous upgrades, reducing congestion and lowering fees.
However, analysts say the pressure isn’t solely coming from the mainnet. Activity continues to shift to L2 networks like Base, Arbitrum, and Optimism; the note states that Base now generates the majority of L2 revenue. Competition from faster and cheaper rival networks, particularly Solana, is also increasing pressure on Ethereum. The fading of the speculative period associated with NFTs, memecoins, and ICOs is also dragging down demand.
Analysts also point to a fragmentation of capital towards application-specific chains. The move of projects like Uniswap and dYdX to their own chains has caused liquidity and revenue to move away from Ethereum. As a result, burning fees decreased while the ETH supply increased, and total value locked (TVL) declined in ETH terms.
In conclusion, while JPMorgan acknowledges that Fusaka has provided a clear short-term boost, it notes that structural challenges persist and remains skeptical about whether the recent surge in Ethereum activity signals a lasting turnaround.
*This is not investment advice.
