Ethereum Bull-Bear Game Analysis and Outlook Ahead of the Imminent Fusaka Upgrade

I. Introduction

This week, developers from across the globe have converged in Buenos Aires for the annual Ethereum Developer Conference. In December, Ethereum is set for a major upgrade—codenamed “Fusaka”—which will increase data throughput eightfold, bolster network security, and introduce new development tools. At the same time, rising institutional participation is driving robust capital inflows, and the Real World Asset (RWA) market is poised to become a new growth engine for Ethereum.

Yet, macroeconomic uncertainty has weighed heavily on Ethereum since early October, sending its price from a $4,900 high into a downward trajectory. The sudden “10·11 crash” black swan event left ETH subdued, recently hovering around $3,000—a decline of more than 30% from its peak. The capital that previously fueled ETH’s rally is now pulling back: DAT Treasury Company shares have plummeted, holdings have shifted from profit to loss, and some shareholders are selling off. Multiple global ETH spot ETFs continue to see net outflows, while traditional institutional investors adopt a wait-and-see attitude. Simultaneously, the Ethereum ecosystem is cooling: total value locked (TVL) has dropped over 20% since October, on-chain stablecoins have repeatedly depegged, and DeFi protocols have suffered successive setbacks.

This article reviews Ethereum’s recent performance, provides an in-depth analysis of current bullish and bearish factors, and offers a forward-looking perspective on Ethereum’s prospects for year-end, next year, and the medium-to-long term. Our aim is to help individual investors cut through the uncertainty, grasp key trends, and make more rational decisions during this pivotal turning point.

II. Ethereum’s Recent Performance Analysis

In the third quarter, Ethereum’s price surged alongside bullish market sentiment, climbing from roughly $2,500 at the end of June to nearly $4,950 in late August—a yearly peak. But in October, compounded macro and internal market risks triggered a dramatic sell-off. On October 11, the unexpected announcement of US tariff hikes on China sparked a global sell-off in risk assets, with crypto suffering steep declines. Ethereum’s price plunged more than 20% to a low near $3,380. Although the market rebounded somewhat, liquidity steadily dried up and the overall trend remained volatile and downward. Currently, ETH trades near $3,000, down over 30% from its August high.

Source: https://www.tradingview.com/symbols/ETHUSD

1. Macroeconomic tightening: This correction is largely driven by shrinking macro liquidity and more hawkish interest rate expectations. In November, the Federal Reserve signaled a tough stance, cooling expectations for a rate cut in December and sharply reducing risk appetite. The crypto market’s Q3 boom was fueled by institutional “new money”—multiple Ethereum spot ETFs launched over the summer, traditional investors rushed in, and several public companies announced large ETH purchases, providing strong buying support. But in October, macro uncertainty increased, safe-haven capital flowed back into the US dollar and Treasuries, and incremental crypto inflows quickly dried up.

2. ETF capital outflows: Data from SoSoValue shows that as of mid-November, total holdings in Ethereum spot ETFs stood at roughly 6.34 million ETH ($192.8 billion), representing 5.19% of ETH supply. However, this month, flows have reversed from net inflow to net outflow, with withdrawals far exceeding new investments and a single-day maximum outflow reaching $180 million. This contrasts sharply with the steady inflows seen in July and August. ETF investors are typically long-term allocators, so consecutive days of net redemptions indicate weakening demand for ETH from traditional financial channels. Their exit not only directly reduces buying pressure, but also amplifies short-term volatility.

Source: https://sosovalue.com/assets/etf/us-eth-spot

3. DAT company incremental slowdown: Divergence is also emerging within the sector. By mid-November, DAT’s total strategic ETH reserves were about 6.24 million ETH, accounting for 5.15% of supply, with accumulation noticeably slowing. Among major holders, BitMine remains the only player still aggressively buying ETH, adding another 67,000 ETH in the past week. SharpLink, another leading company, has stopped buying since mid-October after acquiring 19,300 ETH at an average cost of $3,609, now sitting on unrealized losses. Some smaller treasury companies have been forced to sell assets to survive, such as “ETHZilla,” which sold about 40,000 ETH at the end of October to repurchase company stock and narrow the discount. The treasury sector has shifted from broad expansion to polarization: strong giants can barely maintain buying, while smaller players face liquidity constraints and debt pressure, forced to cut holdings and stop losses.

Source: https://www.strategicethreserve.xyz/

4. Leverage unwinding and increased selling pressure: In the secondary market, rapid withdrawal of leveraged capital has intensified ETH selling pressure. During October’s crash, whales like “Machi Big Brother” who were heavily long were liquidated, spreading panic and hurting bullish sentiment. According to Coinglass, ETH open interest in futures contracts has plunged nearly 50% since the August high, indicating rapid deleveraging and cooling speculation and liquidity. Not only are leveraged bulls retreating, but long-term holders are also loosening positions. On-chain analytics firm Glassnode reports that long-term holders (holding over 155 days) have recently been selling about 45,000 ETH ($140 million) daily—the highest level since 2021—showing that some veteran holders are cashing out at high prices. These signs point to a weakening of internal bullish momentum.

5. Ethereum staking declines: Beacon Chain data shows that since July, the number of active Ethereum validators has dropped by about 10%, marking the first significant decline since the 2022 merge to POS. The main reasons: ETH’s price surge in H1 led many node operators to exit staking and realize profits at high prices, with validator exit queues spiking in late July and daily ETH exits hitting record highs. Annualized staking yields have fallen to about 2.9%, while on-chain lending rates have risen, squeezing arbitrage opportunities and weakening staking’s support for ETH prices.

Source: https://beaconcha.in/

6. Stablecoin and DeFi turbulence: Problems within the Ethereum ecosystem have also surfaced, further eroding investor confidence. On October 11, USDe collapsed to $0.65 due to failure of its circular lending arbitrage mechanism. Although it quickly recovered to near $1, it triggered a chain reaction. Soon after, more risk events hit the decentralized stablecoin sector: Stream protocol’s xUSD depegged due to a failed underlying hedge fund, followed by USDX dropping to $0.38 during a liquidity crisis, with 1:1 redemption risk; another algorithmic stablecoin, deUSD, also fell below its peg. These new stablecoins, once highly anticipated, have all failed in extreme market conditions, exposing the fragility and opacity of “delta-neutral” stablecoin models. The string of stablecoin failures dealt a heavy blow to DeFi. Since mid-October, multiple lending and yield aggregation protocols have reported bad debts and TVL crashes: Morpho‘s USDC vault suffered a 3.6% asset loss after the associated Elixir stablecoin pool went to zero, forcing strategy removal; legacy lending protocol Compound faced bad debt and liquidation risk after some long-tail stablecoins collapsed; Balancer suffered a hack at the end of October, losing over $100 million. These events triggered sustained DeFi capital outflows. By early November, Ethereum’s on-chain TVL had dropped from $97.5 billion to about $69.5 billion, wiping out over $30 billion in just over a month.

Source: https://defillama.com/chain/

Overall, Ethereum has faced a “double whammy” over the past two months: tightening macro conditions and simultaneous pressure on its three main buying forces (ETF, treasury, on-chain capital), combined with internal ecosystem turmoil in stablecoins and security. Amid skepticism, both Ethereum’s price and market cap have come under pressure.

III. Bearish Factors: Macro Headwinds and Potential Risks

It’s clear that the current cloud of bearishness over Ethereum may continue to pressure ETH price and ecosystem development in the short to medium term.

1. Macro tightening and capital outflows

The most significant headwind comes from the macro environment. Major central banks are maintaining cautious interest rate policies amid persistent inflation, with December rate cut expectations dashed and strong risk-off sentiment. The forces that drove ETH higher in H1 (ETF subscriptions, DAT buying, on-chain leveraged positions) have now become potential sources of selling pressure. If the macro environment remains cold for the next six months, more institutions may redeem ETFs or sell treasury company shares, indirectly reducing ETH holdings and driving continuous outflows. The treasury model itself is vulnerable: BitMine and similar companies are trading at a deep discount, shareholder confidence is weak, and if their financing chain breaks or they face repayment pressure, forced ETH sales are a real risk. In summary, until global liquidity turns, capital headwinds may continue to weigh on Ethereum.

2. Competition and diversion effects

Other public chains like Solana and BSC have siphoned off speculative capital. The rise of cross-chain protocols and application chains such as Plasma, Stable, and Arc has also weakened Ethereum’s appeal to projects and users. With modular blockchain concepts gaining traction, some projects are building their own sovereign rollups, bypassing Ethereum’s security. Even within Layer 2, rollups compete: Arbitrum and Optimism offer high incentives and airdrops to attract users, which may trigger an “L2 war.” Success for L2s does not necessarily translate to higher ETH prices and may dilute some value. Some L2s have issued their own tokens for fees, which could reduce demand for ETH as gas in the long run. For now, ETH remains the main settlement asset, and short-term competitive impact is limited, but long-term risks deserve attention.

3. Regulatory and policy uncertainty

The regulatory environment remains a major risk. Although SEC Chairman Paul Atkins has stated that Ethereum should not be classified as a security, any future change in regulatory stance could jeopardize Ethereum’s compliance status and dampen institutional enthusiasm. Global regulatory discussions around DeFi continue, with decentralized stablecoins and anonymous transactions potentially facing stricter restrictions or crackdowns. Such policy shifts could hinder Ethereum’s ecosystem development. For example, if some countries ban banks from staking or restrict retail crypto trading, potential capital inflows would be reduced. Europe’s MiCA regulations impose requirements on stablecoin issuance and DeFi services, raising compliance costs for Ethereum projects.

4. Internal ecosystem risks and trust rebuilding

After recent turbulence, Ethereum faces a trust deficit that will take time to repair. Frequent stablecoin depegging has made DeFi users wary of high-yield products. The market now favors conservative strategies, with users preferring centralized platforms or mainstream stablecoins like USDT/USDC. This will leave many innovative Ethereum protocols facing liquidity shortages and limited growth for some time. Repeated security incidents (hacks, bugs) have also raised doubts about the safety of Ethereum applications, with each major attack or collapse often triggering user ETH sell-offs or capital withdrawals. In the near term, risk management will be a key focus for the Ethereum community, with projects likely to bolster reserves and insurance to restore user trust. Still, bear market psychology can be persistent, and investors usually need positive catalysts—such as price rebounds or breakout applications—to reinvest.

In summary, Ethereum is currently in a grinding bottom phase, challenged by macro headwinds, industry competition, regulatory pressure, and internal ecosystem issues—all of which may continue to suppress ETH performance in the short term. These unfavorable conditions will require time and significant positive catalysts to resolve, and the market may endure further volatility and pain along the way.

IV. Bullish Factors: Upgrade Momentum and Fundamental Support

Despite recent turbulence, Ethereum’s foundation as the largest public blockchain ecosystem remains solid. Its network effects, technical infrastructure, and value consensus continue to show resilience over the long term.

1. Network effects and ecosystem resilience

• Active development and innovation: Ethereum leads the industry in active developers and projects, with new applications and standards constantly emerging. At DevConnect, key developments attracted community attention: Vitalik reiterated Ethereum’s “credible neutrality and self-custody” principles; account abstraction and privacy protection were hot topics.
• Layer 2 ecosystem growth: Although TVL has declined recently, Layer 2 networks such as Arbitrum, Optimism, and Base maintain strong user activity and transaction volume, indicating persistent demand in a low-cost environment. After the Fusaka upgrade, as data publishing costs fall, rollup economics will become more sustainable, attracting more users and projects to Ethereum Layer 2, and reinforcing mainnet value.
• Ethereum network security and decentralization: The total staked ETH on-chain remains above 35 million, about 20% of supply, providing robust POS security. While validator numbers have dipped, new institutional node operators are filling the gap. More traditional institutions are expected to hold and stake ETH for stable returns, creating a lasting liquidity pool for Ethereum.
• Fee burning maintains ETH deflation: EIP-1559’s fee burning mechanism supports ETH’s deflationary nature, increasing price elasticity and giving it inflation-hedging characteristics as a digital asset.

Ethereum’s strong network effects—developers, users, and capital—and its evolving economic model form the foundation for long-term investor confidence.

2. Major upgrades and improvements

• Fusaka upgrade expands capacity and reduces fees: The Fusaka upgrade is Ethereum’s boldest scaling attempt to date, scheduled for mainnet activation on December 4. Its highlight is the introduction of PeerDAS technology, allowing each node to store only about one-eighth of all transaction data, with the rest verified through random sampling and reconstruction. This dramatically lowers node storage and bandwidth requirements. The change could increase data blobs per block eightfold, sharply reducing Layer 2 rollup transaction costs. In short, Fusaka will expand data capacity and lower gas fees, directly benefiting Layer 2 networks and users such as Arbitrum and Optimism.
• Other key improvements: In addition to PeerDAS, the upgrade includes critical changes: blob economics adjustments, DoS resistance enhancements, new tools for users and developers, EIP-7951 native support for P-256 elliptic curve signatures for better hardware wallet and mobile compatibility, and CLZ instruction optimization for contract algorithms.

If successful, Fusaka will be another milestone for Ethereum’s global settlement ambitions, following the 2022 Merge and 2023 Shanghai upgrade, laying the technical foundation for the next growth cycle.

3. New application trends and value consensus

• Enhanced on-chain utility: As Ethereum’s performance improves and fees drop, previously promising but cost-constrained sectors—such as blockchain gaming, social networks, and supply chain finance—may revive. Platforms needing high-frequency, low-value transactions will be more likely to choose upgraded Ethereum or its Layer 2s as their base infrastructure.
• Continued DeFi innovation: Led by Sky (formerly MakerDAO), DeFi protocols are introducing compliant assets, expanding into stablecoin lending, government bond investment, and inter-protocol settlement via sub-projects like Spark, Grove, and Keel. Leading DEX Uniswap recently enabled its fee switch, charging 0.15% on some pools to accumulate treasury funds, marking a shift toward sustainable profit models and empowering governance tokens, indirectly revitalizing the Ethereum network. Additionally, Aave plans to launch V4 with cross-chain features and improved risk controls. As the market improves, more robust and risk-managed DeFi 2.0 could attract a new wave of users.
• Growing recognition and clearer policy: US ETF approvals, retail trading in Hong Kong, and strong stablecoin demand in emerging markets all offer growth opportunities for Ethereum. Especially in high-inflation countries like Argentina and Turkey, stablecoin and payment applications on Ethereum are key tools for inflation hedging and cross-border remittances, demonstrating real-world utility and quietly strengthening ETH’s global value consensus.

In summary, despite short-term challenges, Ethereum’s long-term value remains supported and its core position in the global blockchain landscape is unshaken. These bullish factors may not immediately reverse the market, but like seeds beneath the snow, they could quickly sprout when conditions improve.

V. Outlook and Conclusion

Based on the above analysis, we offer the following outlook for Ethereum’s future trajectory:

Short term (by year-end): Ethereum will likely maintain a weak, range-bound pattern, showing signs of bottoming but unlikely to stage a strong rebound. The positive impact of the Fusaka upgrade is already reflected in the price, so it is unlikely to reverse the trend on its own. However, with ETH down more than 30% from its high, technical oversold conditions and short covering pressure are rising, so further deep declines before year-end appear limited. If there are no major new macro negatives (such as surprise rate hikes), investor confidence may recover slightly, and ETH could slowly climb above $3,500 to consolidate. Note that year-end liquidity is tight, and any rebound without sufficient volume will likely be limited, with $3,500 as a key resistance level.

Medium term (2024 full year to H1 2025): We expect Ethereum to go through a bottoming and accumulation phase in H1 2024, with potential strengthening in H2. Specifically, Q1 2024 may see continued consolidation, while year-end tax selling and institutional portfolio rebalancing could cause volatility in January. However, by mid-year, a turning point may emerge: if falling inflation leads the Fed to cut rates and global liquidity improves, risk assets including ETH could rebound. Combined with renewed risk appetite around the US midterms, ETH could start a new uptrend, rising to the $4,500–$5,000 range.

Long term (late 2025 and beyond): Looking further ahead, Ethereum is likely to reach new highs in the next full bull cycle, solidifying its role as the “global value settlement layer.” From H2 2025 to 2026, if macro conditions remain loose and blockchain adoption accelerates, ETH could potentially reach the $6,000–$8,000 range. This outlook is based on two main points: First, after Fusaka, ongoing upgrades like Verkle trees, PBS proposals, and full sharding will continually improve performance and lower costs, attracting massive new applications and users to drive value higher. Second, Ethereum’s network effects are accelerating—more users attract more developers, which in turn brings more assets and applications, creating a positive cycle. Long term, Ethereum could become the foundational network for trillions of dollars in economic activity, with demand for ETH (gas payments, collateral, store of value) far exceeding current expectations. Additionally, ETH’s yield-generating nature makes it uniquely attractive to institutions; as the regulatory environment matures, large pension and sovereign funds may allocate to ETH just as they do to real estate and equities, bringing vast new capital and pushing ETH to higher value centers.

Conclusion: As a cornerstone of the crypto world, Ethereum has survived multiple bull and bear cycles, emerging stronger each time despite skepticism. The battle between bullish and bearish forces will eventually resolve, and time favors technology and value. After self-renewal and surviving market tests, a stronger Ethereum may once again stand center stage in the coming years, achieving new milestones.

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