Ethereum's Fusaka Upgrade Delivers Short-Term Gains, but Structural Challenges Persist

The Fusaka upgrade sparked a flurry of network activity in December 2025, with transaction volumes and active addresses jumping noticeably. However, Wall Street giant JPMorgan has raised serious questions about whether this recent surge can be sustained, especially given the intense competition Ethereum now faces from faster, cheaper blockchains and its own layer-2 ecosystem.

Immediate Results: Lower Fees and Higher On-Chain Activity

Fusaka, which built upon the earlier Pectra upgrade deployed in May 2025, proved an effective short-term remedy for network congestion. The upgrade expanded Ethereum’s data capacity by increasing the number of “blobs”—a technical mechanism that allows more data to be processed per block. This change immediately drove fees downward and pushed transaction throughput higher, particularly benefiting layer-2 networks that rely on the Ethereum mainchain for data storage.

By making data posting cheaper and more efficient, Fusaka temporarily reversed a trend that had taken hold since the Dencun upgrade: the gradual migration of user activity away from the main chain toward secondary solutions. The numbers don’t lie—at least in the immediate aftermath.

The Layer-2 Problem: Success May Have Its Own Consequences

Yet here’s the paradox. The very layer-2 networks that Fusaka was designed to help have become Ethereum’s most formidable competitors. Base, Arbitrum, and Optimism now capture the majority of layer-2 revenue, siphoning off liquidity and users that might otherwise interact with the mainchain.

JPMorgan analysts, led by Nikolaos Panigirtzoglou, noted that this capital dispersion represents a structural headwind. The layer-2s aren’t alone in pulling demand away from Ethereum. Faster, cheaper competitors like Solana have also gained traction. Meanwhile, application-specific chains launched by major projects—notably Uniswap and dYdX—have fragmented liquidity even further, diverting fees and transaction volume away from Ethereum’s core ecosystem.

The Speculative Tailwind Has Faded

Another challenge working against sustained growth is the cooling of speculative fervor. The booms in non-fungible tokens (NFTs), memecoins, and initial coin offerings (ICOs) that once drove massive activity spikes have largely subsided. Without these cyclical speculative waves, baseline transaction demand on Ethereum has struggled to maintain its peak levels.

This reduced activity has had downstream effects. Fee burning—the mechanism that reduces ETH supply and benefits long-term holders—has declined. Total value locked (TVL) denominated in ETH terms has contracted. These dynamics could weigh on ether’s appeal over time, especially if speculation doesn’t return.

JPMorgan’s Historical Perspective: Past Upgrades Haven’t Solved the Problem

The investment bank’s skepticism runs deeper than near-term analysis. Historically, Ethereum’s successive upgrades have failed to meaningfully bolster network activity on a sustained basis. Each upgrade delivers a temporary boost before structural forces reassert themselves.

Fusaka follows this pattern. While it provided genuine short-term relief and sparked renewed on-chain engagement, JPMorgan’s analysts believe the rebound will eventually lose momentum unless Ethereum can address the underlying forces fragmenting its ecosystem and driving capital toward alternatives.

As of early February 2026, ETH was trading around $2,310, down 7.21% over the previous 24 hours—a reminder that positive technical developments don’t always translate into sustained price performance or network dominance.