1. Introduction

This week, developers from around the world are gathering in Buenos Aires for the annual Ethereum Developer Conference. Additionally, Ethereum is set to undergo a significant upgrade codenamed "Fusaka" in December, which will increase data throughput by eight times, enhance network security, and introduce new development tools. At the same time, increased institutional participation is bringing strong capital inflows, and the RWA market is expected to provide a new growth engine for Ethereum.

However, due to the uncertainty in the macro environment, Ethereum's price has fallen into a downward channel since early October, dropping from a high of $4,900. Especially after the "10·11 crash" black swan event, the price of ETH has struggled, hovering around $3,000 recently, down over 30% from its peak. The funds that previously supported ETH's rise are now withdrawing: shares of the Ethereum Treasury Company (DAT) have plummeted, turning from profit to loss, with some shareholders selling off to cash out; multiple ETH spot ETFs globally have seen continuous net outflows, and traditional institutional investors are adopting a wait-and-see attitude. Meanwhile, the Ethereum ecosystem has frequently encountered a chill: the total locked value has decreased by over 20% since October, on-chain stablecoins have faced consecutive depegging events, and DeFi protocols have suffered setbacks one after another.

This article will review Ethereum's recent performance, deeply analyze the current favorable and unfavorable factors facing Ethereum, and look ahead to Ethereum's prospects and trends by the end of the year, next year, and even in the medium to long term, hoping to clarify the fog for ordinary investors, grasp the trends, and provide some reference for making more rational judgments during this critical turning point.

2. Recent Performance Analysis of Ethereum

In the third quarter of this year, Ethereum's price surged amid rising market sentiment, climbing from around $2,500 at the end of June to nearly $4,950 in late August, a peak for the year. However, entering October, a combination of macro and endogenous market risks triggered an "epic crash." On October 11, the unexpected announcement by the U.S. to impose additional tariffs on China acted as a catalyst, leading to a global sell-off of risk assets, with the crypto market experiencing a sharp decline, and Ethereum's price plummeting over 20% to around $3,380. Although the market rebounded afterward, liquidity gradually drained, and overall it has been oscillating downward. As of now, the ETH price is approximately $3,000, down over 30% from the August high.

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

1. Tightening Macro Environment: Behind this round of adjustment, tightening macro liquidity and hawkish interest rate expectations are significant factors. The Federal Reserve sent strong signals in November, cooling market expectations for a rate cut in December, leading to a notable decline in risk appetite. The prosperity of the crypto market in the third quarter was largely due to institutional funds "speculating on new assets"—multiple Ethereum spot ETFs were launched in the summer, attracting traditional investors, coupled with several listed companies announcing substantial purchasing plans, creating strong buying support. However, as October approached, the uncertainty in the macro environment increased, with safe-haven funds flowing back into the dollar and U.S. Treasury bonds, rapidly depleting the marginal increment in the crypto market.

2. ETF Fund Outflows: According to SoSoValue data, by mid-November, the total holdings of Ethereum spot ETFs were approximately 6.34 million units (worth $192.8 billion), accounting for 5.19% of ETH's supply. However, this month, the funds have shifted from net inflows to net outflows, with the scale of withdrawals significantly exceeding new inflows, and the maximum daily outflow reached $180 million. This starkly contrasts with the steady capital inflow seen in July and August. ETF investors are primarily long-term holders, and consecutive days of net redemptions indicate that the demand for ETH from traditional financial channels is weakening. Their withdrawal not only directly reduces buying pressure but may also amplify short-term volatility.

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

3. DAT Company Incremental Contraction: There has also been differentiation within the sector. As of mid-November, the overall strategic reserve of Ethereum held by DAT was approximately 6.24 million units, accounting for 5.15% of the supply, with the pace of accumulation noticeably slowing in recent months. Among the "whales," the pioneer BitMine has become almost the only major player still aggressively buying ETH, having added 67,000 units in the past week. In contrast, another leading company, SharpLink, has ceased its buying activities after acquiring 19,300 units in mid-October, with an average holding cost of about $3,609, now facing a paper loss. Furthermore, some small and medium treasury companies have been forced to sell off assets to survive: for instance, "ETHZilla" sold approximately 40,000 ETH at the end of October to repurchase its own stock, hoping to narrow the price discount. The treasury sector has shifted from previous broad expansion to polarization: capable giants can still maintain buying pressure, while smaller players are trapped in liquidity constraints and debt repayment pressures, forced to reduce positions to stop losses.

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

4. Leverage Liquidation and Selling Pressure: In the secondary market, the rapid retreat of leveraged funds has further intensified the selling pressure on ETH. During the October crash, the positions of whales like "Brother Ma Ji" who had been continuously long were forcibly liquidated, spreading panic in the market and undermining bullish sentiment to some extent. According to Coinglass statistics, the open interest of ETH contracts has plummeted nearly 50% since the August peak, indicating that leveraged funds are rapidly deleveraging, which means both speculative enthusiasm and liquidity in the market are cooling. Not only are leveraged longs retreating, but long-term holders are also beginning to adjust their positions. On-chain analysis firm Glassnode reported that long-term holders who have held ETH for more than 155 days are recently selling about 45,000 ETH daily (approximately $14 million), the highest selling level since 2021, indicating that some older holders are choosing to cash out at high prices. This series of signs shows that the bullish forces within the market have significantly weakened.

5. Ethereum Staking Retreat: Beacon chain data shows that since July, the number of active Ethereum validators has decreased by about 10%, marking the first significant decline in the validator scale since the transition to POS in 2022. The main reasons are that in the first half of this year, the significant rise in ETH led many node operators to choose to exit staking to realize profits at high prices, with a surge in validator exit queues in late July, creating a historical high for daily ETH withdrawals; secondly, the recent annualized staking yield has dropped to about 2.9%, while on-chain lending rates have risen, squeezing the arbitrage space, and the staking's price support for ETH has correspondingly weakened.

Source: https://beaconcha.in/

6. Stablecoin and DeFi Turmoil: Issues within the Ethereum ecosystem have also been exposed, further undermining investor confidence. On the day of the October 11 crash, USDe collapsed due to a failure in its circular lending arbitrage mechanism, dropping to as low as $0.65. Although it quickly recovered to near $1, it triggered a chain reaction. Subsequently, several risk events re-emerged in the decentralized stablecoin space: the xUSD issued by the Stream protocol severely depegged due to the underlying hedge fund's collapse, and the similarly structured USDX also fell to $0.38 during a liquidity crisis, facing risks of not being redeemable at a 1:1 ratio; another algorithmic stablecoin, deUSD, also failed to maintain its peg, all dropping below their pegged prices. These once-promising new stablecoins faltered in extreme market conditions, exposing the vulnerabilities and black-box risks of "delta-neutral" stablecoin models. The consecutive failures of stablecoins have dealt a heavy blow to DeFi. Since mid-October, several lending and yield aggregation protocols have reported bad debts and a sharp drop in TVL: the Morpho protocol's USDC treasury faced a total loss due to the associated Elixir stablecoin pool's value dropping to zero, forcing it to delist related strategies, resulting in a loss of about 3.6% of the treasury's assets; the established lending protocol Compound also faced bad debt pressure due to the collapse of some long-tail stablecoins, triggering a liquidation crisis. The Balancer protocol suffered a hacker attack at the end of October, with losses exceeding $100 million. These events have led to a continuous outflow of funds from DeFi. As of early November, the on-chain TVL of Ethereum has dropped from a peak of $97.5 billion to about $69.5 billion, evaporating over $30 billion in just over a month.

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

Overall, Ethereum has undergone a "double kill" test from external to internal over the past two months: the tightening external macro environment has simultaneously pressured the three main buying forces (ETFs, treasuries, on-chain funds), while the internal ecosystem has faced turmoil in stablecoins and security. Amidst skepticism, both Ethereum's price and market capitalization are under pressure.

3. Unfavorable Factors: Macro Shadows and Potential Concerns

It is undeniable that the unfavorable shadows currently hanging over Ethereum may continue to exert pressure on ETH prices and ecological development in the short to medium term.

1. Macro Tightening and Fund Withdrawal

The biggest unfavorable factor comes from the macro environment. Major central banks worldwide are maintaining cautious interest rate policies amid unstable inflation, and expectations for a rate cut in December have been thwarted, leading to heightened market risk aversion. Several forces that drove ETH's rise in the first half of this year (ETF purchases, DAT buying, on-chain leverage accumulation) have now become potential sources of selling pressure. If the macro environment remains cold in the next six months, it is possible that more institutions will indirectly reduce their ETH positions by redeeming ETFs or selling treasury company stocks, resulting in sustained capital outflows. Particularly, the treasury model itself has certain vulnerabilities: companies like BitMine currently have significantly discounted stock prices, and shareholder confidence is low. If their financing chains break or they face repayment pressures, the risk of being forced to sell ETH to cash out cannot be ignored. In summary, until a turning point in global liquidity is seen, the headwinds in the capital front may continue to overshadow Ethereum.

2. Competition and Diversion Effects

Other public chains like Solana and BSC have diverted speculative funds to some extent. Additionally, the rise of cross-chain protocols and application chains like Plasma, Stable, and Arc has weakened some of Ethereum's attractiveness to project teams and users. With the rise of modular blockchain concepts, some projects are even building their own sovereign Rollups, no longer relying on Ethereum's security. Moreover, within the Layer 2 space, there is competition among various Rollups: Arbitrum and Optimism are offering high incentives or airdrops to compete for users and traffic, which may lead to an "L2 war," and the success of L2 does not directly equate to an increase in the main chain's ETH price; rather, it may dilute some value. For instance, some L2s have issued independent tokens for fee payments, which may impact the demand for ETH as Gas in the long run. Of course, ETH remains the primary settlement asset for now, and short-term competitive shocks are limited, but long-term vigilance is warranted.

3. Regulatory and Policy Uncertainty

The regulatory environment is also a Damocles sword hanging overhead. Although SEC Chairman Paul Atkins has stated that Ethereum should not be considered a security, if the regulatory stance changes in the future, Ethereum's compliance status may be called into question, which could affect institutional participation enthusiasm. Furthermore, discussions on regulating DeFi are underway in various countries, and features like decentralized stablecoins and anonymous transactions may face stricter restrictions or even crackdowns. These policy variables could become constraints on the development of the Ethereum ecosystem. For example, if certain countries prohibit banks from participating in staking or restrict retail investors from buying and selling crypto assets, it would directly reduce potential capital inflows. Additionally, the MiCA regulations in Europe impose requirements on stablecoin issuance and DeFi services, which may increase compliance costs for Ethereum projects.

4. Internal Ecological Risks and Trust Rebuilding

After a series of upheavals, the trust deficit within the Ethereum ecosystem will take time to mend. On one hand, the frequent depegging events of stablecoins have left DeFi users wary of high-yield products. Currently, the overall market risk appetite has decreased, and conservative strategies are prevalent, with users favoring centralized platforms or mainstream stablecoins like USDT/USDC, which will lead to liquidity shortages and growth limitations for many innovative protocols on Ethereum in the near future. On the other hand, frequent security incidents (such as hacks and vulnerabilities) have raised doubts about the security of Ethereum's application layer; each major attack or collapse is often accompanied by related protocol users selling ETH or withdrawing funds. It can be expected that in the near future, risk governance will become a focal point for the Ethereum community, and project teams may strengthen reserves and insurance measures to restore user trust. However, once a bearish market mentality takes hold, investors often require more positive stimuli (such as price rebounds or new applications) to be willing to reinvest.

In summary, Ethereum is currently in a phase of bottoming out amid internal and external challenges. The retreat of macro capital, industry competition, regulatory pressures, and issues within its own ecosystem may continue to suppress ETH performance in the short term. These unfavorable conditions will require time and sufficient positive stimuli to resolve. During this process, the market may still experience pain and fluctuations.

4. Favorable Factors: Upgrade Drivers and Fundamental Support

Despite recent turmoil, Ethereum's foundational position as the largest public chain ecosystem remains solid, with its network effects, technical foundation, and value consensus demonstrating resilience over the long term.

1. Network Effects and Ecological Resilience

• Active Development and Innovation: The number of active developers and projects on Ethereum remains the highest in the industry, with a continuous emergence of new applications and standards. During the DevConnect conference, several important developments drew community attention: Vitalik reiterated Ethereum's philosophy of "trustworthy neutrality and self-custody"; topics such as account abstraction and privacy protection became focal points.

• Layer 2 Ecosystem Thriving: Although total TVL has recently faced setbacks, user activity and transaction volume on Layer 2 networks like Arbitrum, Optimism, and Base remain relatively high, indicating that there is still potential demand on-chain in a low-cost environment. After the Fusaka upgrade, as the cost of data publication decreases further, the economic model of Rollups will become more sustainable, attracting more users and projects to deploy on Ethereum's Layer 2, thereby benefiting the main chain's value.

• Security and Decentralization of the Ethereum Network: The total amount of staked ETH on-chain still exceeds 35 million units, accounting for about 20% of the supply, providing solid POS security assurance. Even though the number of validators has slightly declined recently, new institutional node operators are filling the gaps. In the future, more traditional institutions are expected to hold and stake ETH to obtain stable returns, creating a continuous "reservoir" of funds for Ethereum.

• Fee Burning Maintains ETH Deflation: The EIP-1559 fee burning mechanism maintains a deflationary attribute, which is expected to amplify ETH price elasticity, giving it characteristics similar to "digital asset inflation hedging."

It is evident that Ethereum's strong network effects (developers + users + capital network) and increasingly refined economic model form the underlying logic that continues to attract long-term investors.

2. Major Upgrades and Improvements

• Fusaka Upgrade for Scaling and Cost Reduction: The Fusaka upgrade is seen as the boldest scaling attempt in Ethereum's history. According to the plan, this upgrade will be activated on the mainnet on December 4. The highlight of Fusaka is the introduction of Peer Data Sampling (PeerDAS) technology, which allows each node to store only about 1/8 of all transaction data, with the rest verified through random sampling and reconstruction, significantly reducing each node's storage bandwidth requirements. This change is expected to increase the number of data blobs that Ethereum can accommodate per block by eight times, greatly reducing the cost of submitting transaction data for L2 Rollups. In other words, Fusaka will further expand data capacity and lower Gas fees, directly benefiting Layer 2 networks and users like Arbitrum and Optimism.

• Other Key Improvements: In addition to the core PeerDAS, this upgrade includes several key improvements: adjustments to the blob economic model, enhanced DoS resistance to limit extreme transactions and block sizes, and new tools for users and developers; EIP-7951 natively supports P-256 elliptic curve signatures, improving compatibility with hardware wallets and mobile devices, and optimizations for contract algorithms with CLZ instructions.

If all goes well, Fusaka may become another milestone in Ethereum's journey towards becoming a global settlement layer, following the 2022 merge and the 2023 Shanghai upgrade, laying a technical foundation for the next growth cycle.

3. New Application Trends and Value Consensus

• Enhancement of On-Chain Practical Value: With improvements in Ethereum's performance and reduced costs, some application areas that were once promising but difficult to scale due to cost issues may regain vitality. For example, blockchain gaming, social networks, and supply chain finance platforms that require high-frequency small transactions will be more willing to choose the upgraded Ethereum or its L2 as their underlying architecture.

• Continuous Innovation in DeFi: Represented by Sky (formerly MakerDAO), DeFi protocols are actively introducing compliant assets: through sub-projects like Spark, Grove, and Keel, expanding into areas such as stablecoin lending, government bond investments, and inter-protocol settlements. The leading DEX Uniswap recently activated a fee switch through community voting, charging a 0.15% protocol fee on certain pools to accumulate treasury funds. This marks the beginning of DeFi protocols exploring sustainable profit models, empowering governance tokens, and indirectly revitalizing the Ethereum network. Additionally, Aave plans to launch version 4, introducing cross-chain functionality and more refined risk management. Once the market environment improves, a more powerful and better risk-controlled DeFi 2.0 is expected to attract a new wave of user inflow.

• Increased Recognition and Gradual Policy Clarity: The successive approvals of U.S. ETFs, the opening of retail trading in places like Hong Kong, and strong demand for stablecoins in emerging markets all present opportunities for user growth for Ethereum. Especially in high-inflation countries (such as Argentina and Turkey), stablecoins and payment applications on the Ethereum network are becoming important tools for residents to hedge against inflation and conduct cross-border remittances, reflecting real-world use value and subtly promoting a global value consensus for ETH.

In summary, despite short-term fluctuations, Ethereum's long-term value support remains intact, and its core position in the global blockchain landscape has not been shaken. These favorable factors may not immediately reverse the market trend, but they are like seeds buried under snow that could quickly sprout and grow once the spring breeze blows.

5. Outlook and Conclusion

Based on the above analysis, we make the following judgments and outlook for Ethereum's subsequent trends:

Short-term (by the end of this year): Ethereum is likely to maintain a weak oscillation tone, showing signs of bottoming out within a range, but a significant rebound is unlikely. The Fusaka upgrade itself is a known positive, and the market has largely digested this, so it is unlikely to reverse the trend solely based on upgrade news. However, considering that ETH's price has rapidly fallen over 30% from its high, there is technical overselling, and the pressure for shorts to take profits is also increasing. If no new major negative macro events occur (such as unexpected interest rate hikes), investor confidence may slightly recover, and ETH could slowly rise above $3,500 before the end of the year. It should be noted that as the year-end approaches, liquidity may tighten, and the height of any rebound lacking volume support may be limited, with the $3,500 level being an important resistance.

Medium-term (2024 throughout the first half of 2025): It is expected that in the first half of 2024, Ethereum will experience a phase of bottoming out and building momentum, with a gradual strengthening anticipated starting in the second half of the year. Specifically, in the first quarter, ETH may continue to oscillate, and factors such as tax-related selling pressure and institutional earnings report adjustments may cause disturbances in January. However, around the middle of the year, the situation may turn: if inflation declines and drives the Federal Reserve to cut interest rates, the global liquidity environment may marginally improve, benefiting the rebound of risk assets, including ETH. At that time, combined with the risk appetite warming due to the U.S. midterm elections, ETH may have the opportunity to start a new upward trend, rising to the $4,500-$5,000 range.

Long-term (end of 2025 and beyond): Looking further ahead, Ethereum is still expected to reach new highs in the next complete bull market cycle, solidifying its position as the "global value settlement layer." In the second half of 2025 to 2026, if the macro environment becomes more accommodative alongside large-scale blockchain applications being implemented, ETH's price has the potential to move towards the $6,000-$8,000 range. This judgment is based on the following logic: First, after the Fusaka upgrade, Ethereum's continuous upgrades, such as Verkle trees, PBS proposals, and full sharding, will continuously improve performance and reduce costs, attracting a massive influx of new applications and users, providing solid support for value enhancement. Second, Ethereum's network effects are showing an accelerating snowball effect; more users attract more developers, leading to more assets and applications, creating a virtuous cycle. In the long run, Ethereum is highly likely to become the foundational network supporting trillions of dollars in economic activity, at which point the demand for ETH (for paying Gas, collateral, and value storage) will far exceed current expectations. Additionally, the attribute of ETH as a productive asset (which can be staked for returns) is particularly attractive to institutions; once the institutional environment matures, large pension funds and sovereign wealth funds may trend towards allocating ETH, similar to current allocations in real estate and equities. This will bring a new wave of massive incremental capital, pushing ETH towards a higher value center.

Conclusion: As an important cornerstone of the crypto world, Ethereum has undergone several rounds of bull-bear cycles, each time being reborn amid skepticism. The battle between favorable and unfavorable factors will eventually reveal its outcome, and time will favor technology and value. After completing self-renewal and weathering market trials, a stronger Ethereum may once again stand at the center of the stage in the coming years, continuing to write a new glorious chapter.

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