JPMorgan has raised fresh concerns over Ethereum’s (CRYPTO:ETH) long-term economic outlook despite a short-term surge in activity following the Fusaka network upgrade.
The investment bank said recent technical improvements have yet to prove they can deliver sustainable growth across the Ethereum ecosystem.
The Fusaka upgrade, rolled out on December 3, increased Ethereum’s maximum data capacity per block from 15 to 21 blobs.
Network data showed an immediate drop in transaction fees following the upgrade, easing costs for users and developers.
Lower fees triggered a sharp rise in transaction volumes and active addresses, briefly boosting on-chain activity.
Analysts said the initial response created the impression of a revival across the Ethereum network.
JPMorgan cautioned that similar post-upgrade surges in the past failed to translate into durable growth.
It remains uncertain that this recent increase in network activity will be sustainable over time.
Nikolaos Panigirtzoglou said.
The report argued that favourable blockchain metrics alone do not signal a fundamental structural shift.
JPMorgan noted that the benefits of lower transaction fees tend to be cyclical and may fade as demand adjusts.
Analysts warned that Ethereum continues to face fragmentation across its wider ecosystem despite technical progress.
The bank highlighted that previous upgrades were technically successful but did not reverse long-term usage trends.
JPMorgan said the current activity rebound does little to offset deeper structural pressures facing the network.
A key concern is the ongoing migration of users and decentralised applications to Layer 2 networks.
Platforms such as Base, Arbitrum and Optimism are capturing growing shares of activity previously held by Ethereum’s main chain.
Data cited from CryptoRank showed Base alone generates between 60% and 70% of total Layer 2 ecosystem revenue.
JPMorgan said this shift is weakening Ethereum’s ability to capture fees and retain economic value on its base layer.
Analysts also pointed to rising competition from alternative blockchains offering faster and cheaper transactions.
Solana (CRYPTO:SOL) was cited as a key beneficiary of capital and liquidity flows moving away from Ethereum.
The report noted a decline in speculative activity, including NFTs, memecoins and other trends that previously drove usage.
JPMorgan said these volume drivers have either matured, migrated, or lost momentum since the last bull market.
Major decentralised finance platforms are also reducing Ethereum’s share of network flows.
Uniswap has moved toward its own network, while dYdX operates on an independent chain.
Analysts said these shifts pull liquidity away from Ethereum and reduce transaction demand on the main chain.
JPMorgan acknowledged renewed interest following Fusaka, with new Ethereum holders reportedly rising by 110%.
The bank said it remains unclear whether this early enthusiasm can counter long-standing economic pressures.
Ethereum, co-founded by Vitalik Buterin, continues to face questions over how it sustains activity amid rising competition.
JPMorgan concluded that recent gains should be viewed cautiously until evidence of lasting economic impact emerges.
At the time of reporting, Ethereum price was $2,921.81.