Ethereum’s latest upgrade delivered a jolt in activity, but JPMorgan analysts remain skeptical about whether the momentum will hold.
Quick Summary – TLDR:
- Ethereum’s Fusaka upgrade in December 2025 boosted network usage by lowering fees and increasing capacity.
- JPMorgan analysts warn the uptick may be temporary, citing long-standing structural issues.
- Shifts to layer 2 networks, growing competition from chains like Solana, and declining speculative activity continue to hinder Ethereum.
- Capital fragmentation and reduced mainnet usage are weakening Ethereum’s economic fundamentals.
What Happened?
Ethereum’s Fusaka upgrade, launched on December 3, 2025, increased the blockchain’s data capacity and immediately lowered transaction fees. That triggered a noticeable rise in both transaction volumes and the number of active addresses. However, according to a report by JPMorgan, these gains may not be sustainable. The bank’s analysts, led by Nikolaos Panigirtzoglou, argue that past upgrades have similarly caused short-lived spikes that ultimately faded.
ANALYSIS: @JPMorgan says Fusaka gave @Ethereum a short-term activity bump, but warns competition from L2s and other chains could limit any lasting impact. pic.twitter.com/GpHs5aNXQi
— CoinDesk (@CoinDesk) January 22, 2026
Ethereum Sees Short-Term Boost from Fusaka
The Fusaka upgrade expanded Ethereum’s maximum data capacity from 15 to 21 blobs per block. This change allowed more data to be posted per block, which helped ease congestion and reduce gas fees, especially benefiting layer 2 networks that rely on Ethereum for data availability.
The immediate result was a noticeable uptick in onchain activity:
- A rise in the number of active addresses.
- Increased transaction volumes.
- A reduction in transaction fees.
Fusaka built upon earlier upgrades like Pectra and Dencun (Cancun-Deneb), aiming to enhance network efficiency. Together, these updates succeeded in temporarily reviving usage levels. Still, JPMorgan analysts caution that similar past rebounds quickly lost steam.
Layer 2 Shift and Growing Competition
One of the major concerns highlighted in JPMorgan’s note is the continued migration of activity from Ethereum’s mainnet to Layer 2 networks like Base, Arbitrum, and Optimism. The report notes that Base alone now accounts for 60 to 70 percent of total revenue across Ethereum’s Layer 2 ecosystem.
Meanwhile, competition from alternative blockchains is intensifying. Chains such as Solana offer faster and cheaper transactions, capturing both users and developers. This competitive shift is diverting attention and resources away from Ethereum’s core network.
Decline in Speculative Activity and Capital Fragmentation
JPMorgan also pointed out a decline in speculative activity that once fueled Ethereum’s rapid growth. The NFT craze, memecoin surges, and ICO booms that drove significant usage during the 2021-2022 bull run have cooled off or moved to other platforms.
In parallel, capital is becoming fragmented across application-specific blockchains. Platforms like Uniswap and dYdX have launched their own independent chains, drawing liquidity and revenue away from Ethereum. This shift contributes to:
- Lower fee burning.
- An increase in Ethereum’s circulating supply.
- A drop in total value locked (TVL) in ETH terms.
These trends weaken Ethereum’s token economics and overall network value proposition.
Structural Challenges Ahead
JPMorgan analysts remain unconvinced that the recent uptick marks a long-term turnaround. They stress that Ethereum continues to face the same structural headwinds that limited past upgrade impacts.
Looking ahead, Ethereum developers are targeting the Glamsterdam upgrade in late 2026, but even within the community, there is skepticism about maintaining the pace of upgrades seen in recent years.
SQ Magazine Takeaway
I think JPMorgan’s skepticism is hard to ignore. Yes, Fusaka made Ethereum faster and cheaper, but these wins might just be temporary patches if the core issues go unaddressed. With users shifting to layer 2s and competitors like Solana stepping up, Ethereum can’t rely on upgrades alone to stay ahead. It needs to rethink how to retain value and usage on its mainnet. As someone who follows Ethereum closely, I really hope the developers look beyond technical tweaks and address the broader ecosystem challenges. Otherwise, these upgrade-fueled spikes might keep fading out like before.
