JPMorgan doubts Ethereum's post-Fusaka upgrade activity surge will be sustained

JPMorgan analysts are questioning whether Ethereum’s recent jump in network activity following the Fusaka upgrade can last, arguing that the same factors that have held back sustained usage in recent years remain in place.

Ethereum’s Fusaka upgrade, which went live on Dec. 3, expanded the network’s maximum data capacity from 15 to 21 blobs per block and led to an immediate reduction in transaction fees. That drop in fees was followed by a surge in active addresses and transaction volumes.

"However, it remains unclear whether this most recent boost in network activity will be sustained over time," the JPMorgan analysts, led by managing director Nikolaos Panigirtzoglou, said in a Wednesday report. "Historically, Ethereum’s successive upgrades have failed to meaningfully enhance network activity on a sustained basis for several reasons."

The first reason, according to the analysts, is the continued migration of activity away from Ethereum’s main chain and toward Layer 2 networks such as Base, Arbitrum, and Optimism. Citing CryptoRank data, the analysts noted that Base alone now generates roughly 60%–70% of the total revenue produced by all Ethereum Layer 2 networks combined.

Competition from alternative blockchains is another persistent challenge. The analysts said networks such as Solana have captured “substantial” market share by offering faster and cheaper transactions, drawing users and developers away from Ethereum. That competitive pressure has contributed to a broader shift in onchain activity toward rival ecosystems, they added.

The analysts also highlighted the decline in speculative activity that previously drove spikes in Ethereum usage. During the 2021–2022 bull cycle, demand tied to initial coin offerings, non-fungible tokens, and memecoins helped push transaction volumes higher. Much of that speculative activity has since faded or migrated to other chains, reducing a key source of activity that once supported Ethereum’s network metrics, according to the analysts.

In addition, capital that once flowed primarily into Ethereum is now more dispersed across application-specific blockchains. The analysts pointed to examples such as Uniswap’s move to its own Layer 2, Unichain, and dYdX’s transition to an independent chain.

“Both have successfully attracted liquidity to their respective networks, allowing them to capture protocol revenue,” the analysts said.

Overall, these factors have impacted Ethereum’s fee generation and token economics. The analysts noted that lower main-chain activity has reduced fee burning, contributing to an increase in Ethereum’s circulating supply over time and putting downward pressure on prices. The analysts also pointed to a decline in Ethereum’s total value locked in ETH terms between the Pectra and Fusaka upgrades as another negative signal.

"In all, while the Fusaka upgrade induced a sharp increase in Ethereum network activity, such as in transaction volumes and in the number of active addresses, we are sceptical about the sustainability of this activity increase," the analysts concluded. "Historically, Ethereum’s successive upgrades have failed to meaningfully enhance network activity on a sustained basis and in our opinion the reasons behind this are still present."

On Thursday’s All Core Devs call, several Ethereum researchers expressed skepticism that the community will be able to ship two additional hard forks in 2026, matching the pace of last year’s Pectra and Fusaka upgrades.

JPMorgan’s analysts have been less bullish on ETH than on bitcoin. Last year, they said Ethereum was likely to continue facing “intense competition” from rival blockchains and Layer 2 networks. By contrast, the analysts remain bullish on BTC, recently reiterating a $170,000 price target over the next six to 12 months, citing leverage resets and improving relative volatility versus gold.

More broadly, the analysts recently said they expect crypto inflows to continue in 2026, driven largely by institutional investors, after the market recorded nearly $130 billion in inflows in 2025.