Why is Ethereum still bearish after the upgrade? JPMorgan reveals three major dilemmas

JPMorgan’s latest report poured cold water on Ethereum’s Fusaka upgrade. Although this upgrade did boost network activity in the short term, the Wall Street giant believes that such a rebound is unlikely to be sustained. They point out that Ethereum faces not only competition from Layer 2 solutions and Solana but also capital outflows caused by application ecosystem migrations. This reflects a deeper issue: can technological upgrades truly change the ecosystem’s predicament?

Short-term Victory of the Fusaka Upgrade

Ethereum’s Fusaka upgrade, completed in December 2025, indeed achieved its technical goals. By increasing the data capacity of each block, this upgrade effectively reduced transaction fees, leading to an increase in transaction volume and active addresses. From the data, it was a successful technical iteration.

Current ETH market performance also confirms some market recognition of the upgrade—ETH price fluctuates around $2,971.69, with a 24-hour increase of 0.31%, and a market cap of $35.867 billion. But this is only superficial prosperity.

Why JPMorgan Is Not Optimistic About Sustainability

JPMorgan’s pessimistic outlook is not unfounded. The report clearly highlights three levels of structural pressures:

Repetition of historical patterns

JPMorgan points out that each Ethereum upgrade has failed to bring sustained growth in network activity. This is not a technical issue but a market structure problem. Upgrades can improve efficiency but cannot solve the ecosystem’s attractiveness problem.

Competitive landscape squeeze

Ethereum faces multidimensional competition:

• Layer 2 networks (Base, Arbitrum, etc.) divert traffic from the mainnet
• Competing public chains like Solana continue to optimize performance and costs
• These alternatives have established their own ecosystems, and user migration costs are decreasing year by year

Decline in ecosystem vitality

Speculative booms related to NFTs and Meme coins have waned, which was once a major driver of Ethereum activity. More seriously, key applications like Uniswap are migrating to dedicated chains, leading to ongoing capital and traffic outflows.

The combined effects of these factors are already evident: Ethereum’s fee burning is decreasing, ETH supply is increasing, and the total value locked (TVL) measured in ETH is declining.

Fundamental Problems That Upgrades Cannot Solve

Here is a paradox worth pondering: technological upgrades improve network efficiency but cannot change the ecosystem’s competitive position. The reason is that the Fusaka upgrade merely makes Ethereum’s mainnet cheaper and faster, but these advantages have limited appeal to applications that have already migrated to Layer 2 or other chains.

JPMorgan’s view reflects a consensus in the industry—that pure technological progress is no longer sufficient to sustain Ethereum’s network effects. Ecosystem decentralization is a long-term trend that cannot be reversed by a single upgrade.

Summary

The Fusaka upgrade indeed boosted Ethereum’s activity in the short term, but this is more like a placebo rather than a fundamental cure. JPMorgan’s pessimistic outlook, though seemingly harsh, points to the real challenges Ethereum faces: increasing competition, application outflows, and cooling speculative fervor. Upgrades improve technical metrics but do not change market structure. To sustain long-term growth, Ethereum needs not only faster transactions but also ecosystem innovations that attract new applications and users. The short-term effectiveness of the upgrade is clear, but medium-term pressures remain—that is the core message JPMorgan truly wants to convey.