What is the outlook for Ethereum by the end of 2025? Can the Fusaka upgrade reverse the downward trend?

Starting Dilemma: The Pain of Falling from $4950 to $3160

The “black swan” event in October changed everything. The US suddenly announced tariffs on China, triggering a global flight from risk assets. ETH price rapidly plummeted from its high of $4950 this year, briefly dropping below $3380. To date, Ethereum hovers around $3160, down over 30% from its peak. While it may seem like just numbers changing, behind it reflects a sharp cooling of market sentiment.

Those three forces that once supported ETH’s rise—spot ETFs, corporate treasuries, and on-chain leverage—are now collectively hitting the brakes. According to the latest data, the global spot ETF holdings amount to approximately 6.34 million ETH (worth $192.8 billion), but in November, there has been continuous net outflows, with the largest single-day withdrawal reaching $180 million. This is the opposite of the stable daily net inflows seen in July and August, enough to show that traditional financial institutions are cautiously observing.

Triple Pressure: Demand, Confidence, and Ecosystem

Macroeconomic Tightening Signals

The Federal Reserve’s “hawkish” signals are the first cold wind. As inflation proves sticky, expectations of rate cuts by year-end have cooled, and market risk appetite has significantly declined. Global liquidity channels from the dollar and US bonds to crypto assets have closed, exerting heavy pressure on risk assets like ETH.

Corporate Treasury Dilemma

The once bold corporate ETH holdings are now polarized. Large institutions like BitMine continue to buy on dips, recently adding 67,000 ETH. But small and medium-sized companies are in trouble—some are forced to sell their ETH holdings to raise cash, pay debts, or buy back shares, which is essentially pulling the rug from under themselves.

On-Chain Ecosystem Trust Crisis

In mid-October, a chain reaction of collapses shook the Ethereum ecosystem: USDe crashed to $0.65, xUSD couldn’t maintain stability, USDX liquidity dried up… A series of algorithmic stablecoin failures exposed the fragility of their models. This “stablecoin crisis” had obvious spillover effects—Morpho, Compound, and other lending protocols experienced bad debt, and funds fled DeFi en masse.

Ethereum’s total value locked (TVL) dropped from its peak of $9.75 billion to $6.95 billion, evaporating over $3 billion in assets in just over a month. Coupled with losses from hacks on protocols like Balancer, the entire ecosystem fell into a trust spiral.

Underestimated Rebound Factors: Fusaka Upgrade and Fundamentals

But the other side of the story is equally worth noting.

Milestone Significance of the Fusaka Upgrade

Scheduled for December 4, the Fusaka upgrade is Ethereum’s most aggressive scaling attempt since the “Merge” in 2022. Its core innovation is the introduction of PeerDAS (Peer-to-Peer Data Availability Sampling)—each node only needs to store 1/8 of transaction data, with the rest verified through random sampling and reconstruction. This will increase the data blob capacity of a single block by 8 times, directly reducing Layer 2 data submission costs.

Specific benefits include:

• Significantly lower transaction fees on Layer 2s like Arbitrum, Optimism, and Base
• New applications (gaming, social, supply chain finance) becoming feasible due to low costs
• Rollup economic models becoming more competitive through cost optimization

This is not a minor patch but a crucial step toward Ethereum’s goal of becoming the “global settlement layer.”

Ecosystem Resilience Still Exists

The seemingly devastated ecosystem is actually still self-healing:

• The number of developers on Ethereum remains industry-leading, with DevConnect attracting global innovation
• Although Layer 2 ecosystems have been impacted, transaction activity remains high, and user stickiness on Arbitrum, Optimism, and Base indicates demand hasn’t faded
• Over 35 million ETH are staked, accounting for more than 20% of circulating supply, providing solid security for the network

The Dawn of DeFi 2.0

Crisis drives innovation. Leading protocols like Sky (formerly MakerDAO) and Uniswap are exploring sustainable revenue models—through protocol fees, cross-chain integrations, and institutional-grade risk controls—to rebuild user confidence. Aave plans to launch V4, integrating cross-chain capabilities and more refined risk management, laying the groundwork for the next growth cycle.

Phased Outlook: From “Hibernation” to “Awakening”

Immediate Performance (Until the End of This Year)

Ethereum is likely to continue weak oscillations, but the bottom features are gradually emerging. Technically, ETH is oversold (down over 30%), with increasing short-term stop-loss pressures, limiting deep declines. Unless macro shocks occur again (e.g., a sudden rate hike by the Fed), the downside is limited.

Fusaka upgrade, already priced in by the market, may not alone reverse the trend, but in the absence of new black swan events, investor sentiment could ease. Although liquidity tends to be tight at year-end, ETH is expected to find support above $3500, forming a stabilization pattern.

Mid-term Development (2024 to Mid-2025)

In early 2024, ETH may continue testing lows, with volatility driven by earnings reports and financial adjustments in January. But the key turning point is in the second half:

If inflation data continues to decline and the Fed begins a rate-cut cycle, the improved global liquidity environment will directly benefit risk assets like ETH. Coupled with market expectations around the US mid-term elections, ETH could enter a new upward phase, targeting $4500-$5000.

At this point, the benefits of the Fusaka upgrade will be fully realized, and explosive growth in Layer 2 applications will create positive feedback, boosting the mainnet value.

Long-term Outlook (End of 2025 and Beyond)

A grander vision lies ahead. From late 2025 to 2026, assuming macro liquidity further loosens and blockchain applications scale up, ETH could challenge new highs of $6000-$8000.

The basis for this judgment includes:

• Continued upgrades like Verkle trees, PBS, full sharding will enhance Ethereum’s performance and cost-efficiency
• Network effects will accelerate like a snowball—more users → attract more developers → more applications → stronger network → more users
• Institutional maturity will bring incremental allocations: once regulatory clarity is achieved, pension funds and sovereign wealth funds may allocate ETH as they do real estate or stocks
• As a “productive asset” (generating yield via staking), ETH will have long-term appeal in institutional portfolios

Core Logic and Investment Insights

Ethereum is undergoing a “repair phase in winter.” Short-term pain stems from macro tightening and ecosystem rebuilding, but the long-term fundamentals—technological upgrades, network effects, and value consensus—remain intact.

Fusaka upgrade exemplifies Ethereum’s continuous self-evolution. Each upgrade diminishes the constraints of the “Ethereum Impossible Trinity,” making more real-world applications feasible. From payments to DeFi, from NFTs to RWA (real-world assets on-chain), expanding application landscapes will ultimately translate into increased demand for ETH as a foundational asset.

For investors, the key is to distinguish short-term noise from long-term signals. When pessimism dominates the market, it often presents the best window for long-term asset allocation. Ethereum’s story is far from over; the real curtain may have just begun.