Ethereum's Fusaka upgrade in December 2025 expanded data capacity, lowered transaction fees, and drove a short-term surge in transactions and active addresses. JPMorgan researchers, however, expressed skepticism about the long-term sustainability of these upside metrics.
JPMorgan Warns Ethereum Network Activity Looks Fragile
Ethereum’s successive upgrades have not meaningfully lifted core network activity on a sustained basis in the past, JPMorgan reportedly saidin its January client note.
The bank pointed to structural headwinds. That includes the ongoing transfer of activity migration to Layer-2 scaling networks, as well as rival blockchains that have intensified competition.
As of January 23, Ethereum’s ecosystem witnessed a record 781.73 transactions-per-second on daily average basis. Roughly 96.50% of those transactions were dominated by layer-2 scaling networks, with Coinbase’s Base leading the pack, according to data resource GrowThePie.
JPMorgan also said weaker fee burns are reducing ETH’s supply-side support, framing the latest upswing as tactical rather than evidence of a lasting core-network revival.
Ethereum’s supply has been growing at an annual rate of 0.21% since the network transitioned to the proof-of-stake consensus mechanism in 2022.
At the same time, its supply has declined by 0.22% per year since the introduction of the fee burn feature in 2021.
Why JPMorgan Analysts Could Be Wrong
Ethereum is not “losing activity” so much as exporting execution to L2s while keeping the economic center of gravity inside its ecosystem.
Fusaka’s PeerDAS upgrades expanded blob capacity. They also kept validator requirements manageable. That makes it cheaper for Layer-2s to post data to Ethereum. It also lets them scale users without clogging the base layer.
In that model, more transactions on L2 is the objective. Ethereum becomes the security, data-availability, and settlement layer.
GrowThePie data supports this view. Ecosystem application revenue is about $29.8 million. Layer-2s contribute only around 15%. Most revenue is still captured outside L2s even as rollups scale usage.
Stablecoin liquidity shows a similar split. Total stablecoin supply is about $187.3 billion. Layer-2s hold only about 9%.
Lower fee burns matter only if supply growth overwhelms spot demand. Data shows new supply absorption points emerging in recent years.
According to SoSoValue, U.S. spot Ether ETFs held about $18.41 billion in net assets as of January 23. Cumulative net inflows were around $12.68 billion, despite recent outflows.
Public companies and institutional treasuries add another demand source. CoinGecko lists 28 entities holding about 6.18 million ETH. That is roughly 5.12% of supply, valued at $18.2 billion. This suggests ETH is moving into longer-term holdings, not just trading float.
Ethereum’s fundamentals should be judged by whether the ecosystem keeps scaling, whether settlement/data demand persists, and whether ETF/treasury flows keep absorbing supply. It should be reviewed based on whether L1 fees return to 2021-style spikes.