Hotcoin Research | Approaching the Fusaka Upgrade: Ethereum’s Bull–Bear Structure and Forward Outlook

I. Introduction

Developers from around the world have gathered this week in Buenos Aires for Ethereum’s annual global developer conference. Meanwhile, Ethereum is preparing for a major network upgrade in December — the “Fusaka” upgrade — which is expected to:

• Increase data throughput by nearly eightfold
• Strengthen network security and reliability
• Provide new tooling that improves developer productivity and lowers costs

At the same time, institutional participation continues to rise. Capital inflows are strengthening, and the RWA sector is emerging as Ethereum’s next potential growth engine.

However, despite these structural tailwinds, Ethereum has entered a pronounced downtrend since early October. After falling from its local high of USD 4,900, ETH has struggled to reclaim upward momentum. The “10·11 Crash” further accelerated the decline, leaving ETH pinned near USD 3,000, more than 30% below its peak.

Several indicators highlight weakening market support:

• Shares of Ethereum-focused treasury companies (DAT) have dropped sharply, turning many positions from profit to loss and triggering forced selling
• Global ETH spot ETFs continue to experience sustained net outflows
• Institutional sentiment has shifted toward caution
• Ethereum’s on-chain ecosystem is losing strength: total TVL has fallen more than 20% since October, multiple stablecoins have briefly depegged, and several DeFi protocols are facing cascading stress

This report reviews Ethereum’s recent performance, examines the key bullish and bearish forces shaping its trajectory, and provides a structured outlook across the short, medium, and long term. Our goal is to help investors cut through market noise, identify the core drivers behind ETH’s current cycle, and make more informed decisions during this pivotal period.

II. Recent Performance of Ethereum

In Q3, ETH benefited from strong market sentiment, climbing from ~USD 2,500 in late June to nearly USD 4,950 — its yearly high — by late August.But by October, macro pressure and ecosystem-level risks converged, triggering a sharp correction. On October 11, unexpected U.S. tariff announcements on China sparked a global risk-off sentiment, causing a steep sell-off in cryptocurrencies. ETH briefly crashed more than 20% to ~USD 3,380. Although a mild rebound followed, liquidity continued to drain, and Ethereum has since entered a prolonged downtrend around USD 3,000, sitting over 30% below the August peak.

1. Tightening macro conditions

Ethereum’s correction is closely linked to tightening global liquidity and more hawkish interest-rate expectations. In November, the Federal Reserve signaled a firmer policy stance, cooling hopes for a December rate cut and reducing overall risk appetite.

The strong Q3 rally — especially for ETH — was largely driven by fresh inflows from ETFs and publicly listed companies accumulating ETH. However, as macro uncertainty increased, capital rotated back into USD and U.S. Treasuries, draining liquidity from crypto markets and leaving ETH without new marginal inflows.

2. ETF outflows

According to SoSoValue, ETH spot ETFs held approximately 6.34 million ETH (USD 192.8 billion) as of mid-November, representing 5.19% of total circulating supply.

However, monthly flows have flipped negative, with outflows significantly exceeding inflows and single-day redemptions reaching USD 180 million. Compared with the steady inflows seen in July–August, this reversal reflects waning traditional-finance demand for ETH.

Large ETF redemptions not only reduce direct buy-side strength but also amplify short-term price volatility, adding further pressure to an already weakening market.

3. DAT Treasury Slowdown: Diverging Behavior Among Institutional ETH Holders

Internal market dynamics are also shifting. As of mid-November, strategic ETH reserves held by DAT (Digital Asset Treasury) companies reached approximately 6.24 million ETH — about 5.15% of total supply. However, the pace of accumulation has slowed sharply, signaling weakening conviction among some institutional holders.

The divergence is becoming increasingly clear:

• BitMine remains the only major consistent buyer, adding 67,000 ETH in a single week, showing continued confidence in ETH’s long-term fundamentals.
• SharpLink, once an active accumulator, stopped purchasing after mid-October and is now facing unrealized losses with an average cost basis near USD 3,609.
• Several smaller treasury companies are being forced to sell to address cash-flow constraints and corporate obligations.
• For example, ETHZilla liquidated roughly 40,000 ETH to fund a stock buyback program.

Overall, the treasury sector is becoming increasingly polarized:

• Large, well-capitalized firms can maintain accumulation during market weakness,
• while smaller, debt-burdened or cash-tight companies are forced to sell into a declining market, adding additional supply-side pressure.

This imbalance introduces a new risk: treasury-driven sell-offs may accelerate short-term price volatility, especially if macro conditions continue to deteriorate.

4. Liquidations and Sell Pressure: Deleveraging Accelerates the Downtrend

Leveraged capital retreat has added significant downward pressure on ETH. During the October crash, major whale accounts — including “Machi Big Brother” — suffered large long-position liquidations, triggering broader market panic.

• Open interest dropped nearly 50% from August highs (Coinglass), indicating rapid deleveraging and fading speculative activity.
• Long-term holders are also reducing exposure: Glassnode data shows that 155+ day holders have been selling ~45,000 ETH per day, the highest level since 2021.

→ Key Insight:
Both speculative capital and long-term conviction capital are exiting simultaneously, intensifying short-term selling pressure.

• Staking Declines: First Major Validator Drop Since PoS Transition

5. Ethereum’s staking network is showing its first meaningful weakness since the shift to PoS.

• Beacon Chain data indicates active validators are down ~10% since July — the first major decline since 2022.
• Node operators have been taking profit after ETH’s mid-year rally.
• Staking APR has fallen to ~2.9%, reducing yield appeal relative to rising DeFi lending rates, which now offer higher returns.

→ Key Insight:
Declining validator participation reflects falling confidence and reduced yield competitiveness, weakening Ethereum’s fundamental support in the short term.

6. Stablecoin and DeFi Turmoil: Systemic Stress Across the Ecosystem

Ethereum’s broader ecosystem has also been hit by severe instability, amplifying bearish sentiment and accelerating capital flight.

Stablecoin failures:

On October 11, USDe crashed to USD 0.65 after its delta-neutral strategy broke down under stress. Shortly after, other decentralized stablecoins — xUSD, USDX, and deUSD — experienced major depegs triggered by liquidity shortfalls or flawed underlying strategies.

These failures exposed structural weaknesses in delta-neutral stablecoin models during volatile market conditions.

DeFi protocols under pressure:

• Morpho suffered losses following the Elixir pool collapse
• Compound faced emerging bad-debt risks
• Balancer was hit by a nine-figure exploit, further damaging investor confidence

Together, these shocks caused a significant outflow of capital from Ethereum.

Ecosystem-wide impact:

Ethereum’s TVL fell from a yearly peak of USD 97.5B to around USD 69.5B by early November — a decline of over USD 30B. This represents one of the most substantial ecosystem drawdowns since 2022 and signals broad-based risk aversion among both retail and institutional participants.

In short, Ethereum is being hit from both sides — external macro pressure and internal ecosystem stress. Liquidity is leaving through multiple channels: ETFs, treasury companies, and on-chain users. At the same time, stablecoin failures, security incidents, and ecosystem deleveraging have further weakened confidence. Together, these forces have put significant downward pressure on ETH’s price and overall market sentiment.

III. Bearish Factors: Macro Headwinds and Structural Risks

It is undeniable that Ethereum is currently facing several persistent bearish forces that may continue to suppress its performance in the short term.

1. Macroeconomic tightening and capital outflows

The biggest challenge remains the global macro environment. With inflation not yet fully contained, central banks are signaling caution on rate cuts. The very forces that pushed ETH higher earlier this year — ETF inflows, treasury accumulation, and leveraged positioning — are now reversing into potential sources of sell pressure.

If macro conditions remain tight over the next six months, more institutions may redeem ETF shares or unwind treasury-related exposure, indirectly reducing ETH demand.

Treasury companies also face structural fragility. Some, such as BitMine, trade at deep discounts and may be forced to sell ETH if liquidity or debt pressure intensifies. Until global liquidity bottoms and begins to improve, ETH will remain vulnerable to macro-driven headwinds.

2. Competition and capital diversion

Competing ecosystems such as Solana and BSC have attracted speculative capital away from Ethereum. At the same time, cross-chain networks and modular app-chain frameworks (Plasma, Stable, Arc, etc.) are fragmenting both developer activity and user attention. Many projects are choosing sovereign rollups rather than building directly on Ethereum.

Competition within Ethereum’s own Layer 2 ecosystem is also intensifying: Arbitrum, Optimism, and Base are aggressively incentivizing users with grants, points, and airdrops. However, L2 ecosystem growth does not always translate into upward pressure on ETH — especially if L2s rely on their own tokens rather than ETH for gas or security.

3. Regulatory uncertainty

Regulation remains another major overhang. While SEC leadership has hinted that Ethereum may not be classified as a security, future policy shifts could alter ETH’s compliance outlook. Governments are simultaneously exploring DeFi-specific regulation, placing constraints on decentralized stablecoins, leverage, and privacy tools. Stricter rules on staking, custody, or investor participation could also limit Ethereum’s growth trajectory.

The EU’s MiCA framework will introduce additional compliance requirements for projects building on Ethereum, adding operational complexity for developers and service providers.

4. Internal ecosystem risks and confidence rebuilding

Recent stablecoin depegs and security incidents have damaged user confidence. Risk appetite has shifted toward safer strategies and centralized platforms. Without strong incentives or new catalysts, many DeFi protocols may struggle to regain liquidity in the coming months.

Security failures — including hacks, insolvencies, and flawed protocol mechanisms — continue to undermine trust. Rebuilding confidence will take time, and most investors typically wait for clear signals such as price stabilization, successful audits, or new high-utility applications before re-entering.

Summary

Overall, Ethereum is in a consolidation phase shaped by both external macro pressures and internal ecosystem challenges. Without meaningful positive catalysts, ETH may continue to experience a slow and uneven recovery.

IV. Bullish Factors: Upgrades and Fundamental Strength

Despite recent turbulence, Ethereum’s core fundamentals remain intact. Its network effects, developer ecosystem, and value consensus continue to demonstrate long-term resilience.

1. Network Effects and Ecosystem Resilience

Developer activity remains strong: Ethereum still hosts the largest developer community and the most active ecosystem, with new applications and standards emerging continuously. At DevConnect, several themes gained significant attention, including Vitalik’s emphasis on “credible neutrality and self-custody,” as well as progress in account abstraction and privacy technologies.

Layer 2 networks remain active: Although TVL has declined, Layer 2s such as Arbitrum, Optimism, and Base continue to maintain relatively high user activity and transaction throughput. As Fusaka lowers data-availability costs, rollups will become more economically sustainable, attracting more users and developers. This, in turn, strengthens the value proposition of the Ethereum mainnet.

Security and decentralization: Over 35 million ETH remains staked on the Beacon Chain (around 20% of total supply), providing robust PoS security. Although validator counts have dipped, new institutional node operators are entering the market. Over time, ETH staking may be increasingly treated as a stable yield source, forming a long-term liquidity base.

Deflationary dynamics provide long-term support: The EIP-1559 burn mechanism continues to create structural deflationary pressure, enhancing ETH’s long-term price elasticity and reinforcing its value proposition as a “digital inflation hedge.”

Overall: Ethereum’s combined network effects — developers, users, capital flows — and its maturing economic model continue to provide durable long-term support.

2. Major Upgrades and Protocol Improvements

Fusaka expansion and cost reduction: Fusaka is one of the most ambitious scaling upgrades in Ethereum’s history. Scheduled for activation on December 4, it introduces PeerDAS (peer data sampling), enabling each node to store only roughly one-eighth of block data, with the rest verified through sampling and reconstruction. This significantly reduces data overhead and increases block data capacity. As more data blobs become available per block, L2 transaction publishing costs will fall sharply, delivering direct benefits to rollups and end users.

Additional improvements: Fusaka includes a refined blob fee mechanism, stronger DoS protections, and new developer tooling. EIP-7951 introduces native support for P-256 elliptic-curve signatures, improving compatibility with hardware wallets and mobile devices. New CLZ instructions enhance computation efficiency at the contract level.

If successful, Fusaka will represent a major milestone for Ethereum after the Merge (2022) and the Shanghai upgrade (2023), laying foundational infrastructure for the next phase of ecosystem growth.

3. Emerging Application Trends and Strengthening Value Consensus

Real-world use cases are expanding: As performance improves and costs decline, previously constrained use cases — such as on-chain gaming, social applications, and supply-chain solutions — may re-accelerate. These sectors rely on frequent, low-cost transactions that benefit directly from Fusaka’s enhancements.

DeFi innovation continues: Protocols like Sky (formerly MakerDAO) are integrating more real-world assets through sub-projects such as Spark, Grove, and Keel, expanding across lending, treasury investment, and cross-protocol settlement.
Uniswap’s move to enable protocol fees marks a shift toward sustainable business models, strengthening long-term token and network value. Aave’s upcoming V4 upgrade will introduce cross-chain functionality and improved risk controls. As sentiment improves, these more resilient and compliant DeFi protocols could attract new liquidity.

Increasing global recognition and clearer regulatory pathways: U.S. spot ETF approvals, Hong Kong retail access, and rising stablecoin usage in emerging markets create new opportunities. In high-inflation regions such as Argentina and Turkey, Ethereum-based stablecoin payments and remittances already deliver real economic value, gradually strengthening global ETH demand.

Summary

Despite short-term headwinds, Ethereum’s long-term fundamentals remain strong. Once macro conditions stabilize, these underlying bullish factors — including network effects, protocol upgrades, and real-world adoption — may rapidly regain momentum.

V. Outlook and Conclusion

Based on the analysis above, we provide the following outlook across different time horizons.

Short Term (Before Year-End)

Ethereum is likely to remain in a weak consolidation phase while attempting to establish a bottom. The upcoming Fusaka upgrade is largely priced in, meaning it is unlikely to trigger a major trend reversal on its own.

However:

• ETH has already fallen more than 30% from its recent peak
• Oversold conditions may limit further downside
• Short covering could support a mild rebound

If no new macro shocks emerge, ETH may gradually move toward USD 3,500 by year-end. Liquidity typically thins into year-end, so upside is likely capped near the USD 3,500 resistance zone.

Medium Term (2024 — H1 2025)

ETH may enter a base-building phase in early 2024, with potential downside pressure from:

• Tax-related selling
• Institutional portfolio rebalancing
• Continued macro uncertainty

Conditions could improve meaningfully by mid- to late-2024:

• Cooling inflation may allow the Federal Reserve to begin rate cuts
• Global liquidity could improve
• The U.S. midterm election cycle may boost risk appetite

Under these assumptions, ETH may trend toward the USD 4,500–5,000 range.

Long Term (Late 2025 and Beyond)

Looking further ahead, Ethereum remains positioned to reach new all-time highs in the next full bull cycle as it strengthens its role as the global settlement layer for Web3.

Between late 2025 and 2026, ETH has the potential to rise toward the USD 6,000–8,000 range, contingent upon:

• Favorable macro conditions
• Continued ecosystem expansion
• Institutional adoption accelerating

This outlook is supported by:

• Post-Fusaka upgrades (Verkle trees, PBS, full sharding)
• Strengthening network effects
• ETH’s dual role as both collateral and a yield-bearing productive asset
• Growing interest from long-term institutional allocators (pensions, sovereign wealth funds) as regulatory clarity improves

Conclusion

Ethereum has weathered multiple boom-and-bust cycles and emerged stronger each time. The ongoing tug-of-war between bullish and bearish forces will eventually resolve — and, historically, time has favored Ethereum’s underlying technology and value proposition.

After navigating its current challenges, Ethereum may once again stand at the center of the global crypto stage and write its next chapter.

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