Upcoming Fusaka upgrade: Ethereum amidst short-term crisis and long-term prospects

Ethereum is currently in a critical repositioning phase. With the upcoming Fusaka upgrade scheduled for December, the network expects to increase data throughput by 8 times, but challenges from macroeconomic environments and internal ecosystem issues continue to exert strong influence on ETH’s current price at $3.16K — down more than 30% from the peak of $4,900 in August.

Triple Crisis: When Mass Capital Withdraws

Ethereum just experienced a volatile October-November. The “11/10 crash” event not only triggered a wave of sell-offs due to macro news but also exposed deep vulnerabilities within the ecosystem.

First, institutional capital has shifted. Ethereum spot ETF funds, which supported the market during summer, are now experiencing continuous net withdrawals. Data shows daily withdrawals from these funds exceeded $180 million during peak days. This is a complete reversal from the stable buying phase seen in July-August.

Second, Ethereum wallet management companies (DAT), which previously kept buying, have now diversified. While BitMine maintained a buying stance with 67,000 ETH last week, other companies had to sell off. For example, ETHZilla sold about 40,000 ETH at the end of October to meet liquidity pressures, indicating smaller firms are caught in an uncontrollable financial spiral.

Third, long-term holders are starting to take profits at high levels. A report from Glassnode reveals that holders with over 155 days are selling approximately 45,000 ETH daily (equivalent to $140 million), the highest since 2021. Meanwhile, the number of Ethereum validators has decreased by about 10% — the first decline since switching to POS in 2022.

Internal Ecosystem Turmoil

The US is not the only source of trouble. In October, several decentralized stablecoins collapsed or lost peg: USDe dropped to $0.65, xUSD and USDX faced similar issues. These incidents caused heavy losses in DeFi — total value locked (TVL) on Ethereum fell from $97.5 billion to $69.5 billion, a loss of over $30 billion in just over a month.

Major DeFi protocols like Morpho and Compound reported bad debt due to stablecoin collapses. Additionally, a hack attack on Balancer caused hundreds of millions of dollars in damages, further eroding user confidence. When market conditions are tough, investors shift focus to major stablecoins like USDT/USDC, pushing innovative projects into illiquidity.

Legal Clouds and Rising Competition

Beyond internal issues, Ethereum faces external challenges. The threat from Europe’s MiCA regulation, international discussions on restricting DeFi, and decentralized stablecoins could significantly increase compliance costs.

Competition from other blockchains like Solana, BSC, and Layer2 Rollups is also intense. Protocols like Arbitrum, Optimism, and Base support users through large airdrops, creating a “Layer2 war” that could dilute Ethereum’s long-term value, especially if some L2s issue their own tokens to replace ETH as gas.

Fusaka Upgrade: A Ray of Hope

However, it would be a mistake to see Ethereum as a bubble about to burst. The upcoming Fusaka upgrade offers real opportunities.

The core technology of PeerDAS is central to this upgrade. Instead of each node storing 100% of transaction data, they only need to store 1/8 and verify the rest through sampling. This will significantly reduce storage bandwidth requirements, allowing Ethereum to process 8 times more blob data per block — thereby substantially lowering gas costs for Layer2 Rollups like Arbitrum, Optimism, and Base.

The upgrade also includes other important improvements: EIP-7951 supports P-256 signatures, increasing compatibility with hardware wallets; economic model adjustments for Blob; developer optimization tools. If progress goes smoothly, Fusaka will mark a major technical milestone after The Merge (2022) and Shanghai (2023).

Long-term Ecosystem Resilience

Despite current pressures, Ethereum maintains a core advantage through network effects. The number of developers and active projects on Ethereum remains industry-leading. Recent DevConnect conferences highlight new directions: abstract accounts, privacy protections, “trusted neutrality” — concepts shaping the future of the network.

Layer2 ecosystems continue to grow strongly. Although TVL has recently been affected, user activity and transaction volume on Arbitrum, Optimism, and Base remain high. After Fusaka, as data publication costs continue to decrease, the economic model of Rollups will become more sustainable, attracting more applications and users.

Network security remains robust. Total ETH staked exceeds 35 million tokens, accounting for about 20% of the supply, providing strong proof-of-stake guarantees. Although validator numbers have slightly decreased recently, new node organizations are filling the gap, and in the future, more traditional institutions will participate in staking.

The EIP-1559 fee-burning mechanism continues to maintain ETH’s deflationary nature, making it resemble a “digital asset resistant to inflation” — an increasingly important feature for long-term investors.

DeFi 2.0 and New Applications

The DeFi community is not standing still. Sky (MakerDAO old), through subsidiaries like Spark and Grove, is integrating compliant assets, expanding into stablecoin lending and cross-protocol payments. Uniswap has just activated fee collection, earning 0.15% from some pools — a sign that DeFi protocols are exploring sustainable profit models. Aave is launching V4 with cross-chain functionality and more sophisticated risk controls.

Applications that previously struggled with high costs — such as blockchain gaming, social networks, supply chain finance — now have a chance to “revive” as fees decrease. Especially in high-inflation countries (Argentina, Turkey), stablecoins and Ethereum payments are becoming practical tools to combat inflation and facilitate international remittances.

Global Recognition and Opportunities

The approval of Ethereum ETFs in the US, Hong Kong opening to retail investors, and rising stablecoin demand from emerging markets — all create growth opportunities for Ethereum users. As legal clarity improves, large pension funds and sovereign wealth funds may allocate ETH similarly to real estate or stocks, bringing in enormous new capital.

Evolution Scenarios: Three Phases

Short-term (before the end of 2024): Ethereum will find it difficult to recover strongly due to macro capital withdrawals. However, technical indicators show oversold levels — further deep declines are limited. If macro conditions remain stable without shocks, ETH could gradually climb above $3,500 by year-end to consolidate.

Medium-term (2025): Q1 may continue to fluctuate due to year-end selling pressures. But from mid-2025, if inflation decreases prompting the Fed to cut rates, combined with US election expectations, Ethereum could see a new rally towards $4,500–$5,000.

Long-term (from 2026 onwards): After Fusaka, subsequent upgrades like Verkle trees, PBS, and complete sharding will further improve performance. Ethereum’s network effect will accelerate like a snowball — attracting users and developers, bringing assets and applications. If macroeconomic conditions loosen and large-scale applications develop, ETH could reach $6,000–$8,000. In the long run, Ethereum has a strong potential to become the financial platform for trillions of dollars of economic activity, with demand for ETH (paying fees, collateral, and storing value) surpassing current expectations.

Conclusion

Ethereum has survived multiple bull-bear cycles, each time reborn. The battle between adverse and favorable factors will ultimately have a result — and time will favor technology and value. After completing its self-innovation and overcoming market challenges, a stronger Ethereum will lead again in the coming years, continuing to write a new chapter in the global blockchain industry.