The highly anticipated Fusaka Upgrade for Ethereum is on the verge of going live on Wednesday, heralding significant enhancements to the network’s overall functionality. 

Analysts contend that this pivotal development could usher in a considerable supply crunch for ETH, potentially boosting its price during a challenging period for the broader cryptocurrency market.

Layer 2 Solutions To Boost ETH Burn

According to analysts at Bull Theory, the Fusaka Upgrade integrates components from previous upgrades—Osaka, Fulu, and PeerDAS—but its most impactful feature is its resolution of one of Ethereum’s biggest challenges. 

Layers 2 (L2) solutions have long utilized Ethereum’s security while contributing minimal fees back to the network. Despite L2 solutions like Base, Arbitrum, Optimism, and zkSync generating millions in fees from users, the fees recorded on Ethereum tended to diminish to nearly zero when they posted their data. 

Consequently, this meant that significant L2 activity did not result in substantial ETH being burned, even though approximately 85% of Ethereum transactions now occur on these Layer 2 solutions.

The Fusaka Upgrade fundamentally changes this dynamic. A key enhancement is EIP-7918, which mandates that Layer 2 transactions pay real fees to Ethereum. 

This adjustment ensures that every L2 transaction will contribute directly to the burning of ETH—something that was not previously guaranteed. The analysts assert that this feature represents one of the most significant value shifts since the introduction of EIP-1559.

Post-Fusaka Projections

The upgrade is further expected to broaden the scope of ETH burn from being predominantly derived from Layer 1 (L1) transactions to encompassing all L2 activity. 

Historically, most ETH burn has originated from mainnet transactions; thus, the network saw slight inflation in 2024–2025 as Layer 2s made transactions cheaper, leading to a decrease in ETH burn while staking continued to issue new ETH. 

Post-Fusaka, every L2 blob will incur a minimum cost, which will be burned. As Layer 2 adoption increases, the rate at which ETH is burned will also rise, contributing to increased scarcity of ETH.

This enhancement positions Ethereum to shift back towards deflation for the first time in several years. Currently, ETH issues around 620,000 new tokens annually for stakers while burning approximately 350,000 tokens. This results in a net slight inflation. 

However, projections following the Fusaka Upgrade, even with conservative estimates, suggest that the additional burn from L2 activity could range from 200,000 to 400,000 ETH per year. 

Combined with existing burn rates, this could bring the total to over 600,000 ETH, leading to a net neutral or slightly deflationary state for ETH. 

More bullish models predict that if L2 adoption flourishes and demand for blobs rises, burn rates could soar to between 900,000 and 1.2 million ETH annually, resulting in a supply decrease of 200,000 to 300,000 ETH each year. 

Monetary Transformation For Ethereum?

Another notable aspect of the Fusaka upgrade is PeerDAS, which enhances Layer 2 growth by reducing bandwidth requirements by 85%. This efficiency allows L2 solutions to publish more blobs at lower costs, resulting in increased fees and, consequently, more ETH burned.

The upgrade also increases the block gas limit from 36 million to 60 million, allowing more transactions to fit within each block. This increase means that more transactions can occur, leading to higher fees collected and a corresponding rise in burning. 

Furthermore, lower fees for transactions—such as swaps, bridges, on-chain gaming, and social applications—will likely drive more usage, resulting in increased transactions and higher ETH burn.

Ultimately, the analysts believe that the Fusaka Upgrade represents a significant monetary transformation for Ethereum, indicating that the network is not only scaling but also beginning to monetize that scaling effectively.

Featured image from DALL-E, chart from TradingView.com

Ethereum (ETH) has joined Bitcoin (BTC) in a notable price recovery, managing to reclaim the $3,000 mark. This resurgence could signify a pivotal moment for the altcoin, suggesting a potential new upward trend. However, investors remain divided on whether ETH may face further declines or if a year-end rebound could reignite bullish sentiment.

ETH’s December Struggles

In order to anticipate Ethereum’s probable moves in December, Alex Carchidi, an analyst at The Motley Fool, notes that this month has traditionally been a difficult month for the cryptocurrency. Since 2016, Ethereum has only concluded December higher than it started in four of the nine years studied. 

In the remaining five cases, the month ended in negative territory. The average December return throughout this span is about 7%, indicating that a strong “Santa rally” is improbable. The median performance shows a 6% drop. 

Examining the relationship between November and December reveals a more intriguing pattern. Between 2016 and 2024, when November has been weak for ETH, December often followed suit, with three out of four instances showing declines. 

The only outlier was in 2018, when Ethereum rebounded in December after a particularly harsh downturn in November. This historical context suggests that a poor performance in November could carry over into December, making a cheerful month less probable.

But while December’s performance has historically been mixed, the beginning of the year has typically shown strong potential for the Ethereum price, particularly in the first and second quarters. 

In fact, average returns tend to peak in the first quarter at around 77% and the second quarter at approximately 64%, indicating that there may still be significant growth on the horizon for the leading altcoin.

Tom Lee Foresees Ethereum Surging To $7,000 

Amidst this hypothetical scenario, Tom Lee, chairman of BitMine Immersion Technologies and a major industry advocate, predicts a bright future for Ethereum in the near and long term. 

The executive believes that the cryptocurrency could surge to $7,000 per coin heading into the first quarter of 2026, reflecting a nearly 150% price surge from its current value. 

Lee is even more optimistic about the long term, predicting that if his vision for a decentralized financial system materializes, the Ethereum price could soar by 2,090% to reach $62,000 by 2035.

After a challenging year in which ETH significantly underperformed its peers, it has shown increased resilience, especially following the recent crash in crypto prices that saw the token’s valuation drop to $2,600 last Friday. 

Currently, ETH is trading just above $3,000. While this is not bullish enough to outpace the recent crash, ETH is positioned to recover significantly if demand and capital flow back into exchange-traded funds (ETFs) as the year comes to a close. 

Featured image from DALL-E, chart from TradingView.com