Author: @BlazingKevin_ , the Researcher at Movemaker

Last week, Ethereum achieved a weekly increase of 26.4%, breaking through the pressure level of 2800 and rushing to the foot of 4000. Will this be the fourth doomsday moment in the past two years? Or is the nature of Ethereum changing? As the only two crypto ETFs, is Ethereum moving closer to the rising path of Bitcoin? This article analyzes the changes that have taken place in Ethereum in the past week and this year, and the expectations for the future, based on the fundamentals and technical price trends of Ethereum.

In conclusion, compared with previous cycles, the current ETH rise structure is closer to the BTC model dominated by institutions, which is characterized by a combination of a gentle climb of "two steps forward and one step back" and a strong sprint without a callback, which is not a typical rise model in a retail bull market. This model allows the digestion of profitable chips in high-level sideways trading, thereby reducing risk indicators.

Therefore, even if the profit supply percentage reaches the highest point in the previous rounds of bull markets, the rise led by institutions is likely to no longer follow the pattern of retail bulls, but tend to the steady rise of Bitcoin, and the profit supply percentage will decrease in the high sideways trading.

What are the major upgrades of Ethereum in the future? Will they have a substantial positive impact on the fundamentals?

1. Lower the verification threshold and promote the popularization of light nodes

Ethereum plans to launch a verification mechanism optimization project in the second half of 2025, which will be promoted simultaneously with other technical upgrades and is expected to be gradually improved in the next two years. The core measures include lowering the threshold for validator participation, gradually reducing the current 32 ETH staking requirement to 16 ETH, and even as low as 1 ETH in the future, while optimizing the staking mechanism to increase the annualized rate of return to 6%-8%. By introducing a light node verification model, the technical and financial costs of participation will be further reduced, attracting more validators to join and enhancing the degree of network decentralization. This will push the staking rate to over 40%, lock in more than 48 million ETH, reduce the circulating supply, strengthen the deflationary trend, and enhance the attractiveness of ETH as a digital asset.

2. Realize cross-chain liquidity integration between mainnet and L2

Ethereum plans to launch a cross-chain liquidity integration project by the end of 2025, which is expected to be gradually improved between 2026 and 2027. It aims to break down the interaction barriers between the mainnet and major Layer 2 networks (such as Arbitrum, Optimism, Base, etc.) and build a unified cross-layer ecosystem. By integrating decentralized capital pools, the goal is to increase the current total locked-in volume of approximately US$120 billion to more than US$200 billion, while reducing cross-layer transaction costs by 90% and achieving second-level transaction confirmation. This will significantly improve the efficiency of capital calls for DeFi protocols, promote the synergy between the mainnet and L2, and significantly improve the capital utilization and overall performance of the Ethereum ecosystem.

3. Reshaping the Ethereum Virtual Machine with RISC-V Architecture

Vitalik Buterin proposed earlier this year to replace the existing Ethereum Virtual Machine (EVM) with the open source RISC-V instruction set architecture to achieve a performance leap in the execution layer and simplify the protocol logic. He pointed out that this change could bring up to 100 times the efficiency of zero-knowledge proofs. This technological innovation is expected to start research and development in the second half of 2025 and will be implemented in stages between 2026 and 2030. The core goals include increasing the execution speed of smart contracts to 3-5 times the current level while reducing Gas fees by more than 50%. The new architecture will be more adaptable to modern hardware acceleration technology, paving the way for high-concurrency scenarios such as high-frequency trading, real-time interactive games, AI reasoning, and micropayments. The reduction in transaction costs will encourage more frequent user participation, reshape edge transaction scenarios, and form a positive cycle of ETH usage demand.

4. Plans for introducing zkEVM on the mainnet

In a technical article, technical experts from the Ethereum Foundation discussed the solution of optimizing block execution through zero-knowledge proofs (ZK-proofs). This technical upgrade is expected to be deployed on the mainnet between the end of 2025 and the middle of 2026, with the goal of achieving 99% of blocks to be verified within 10 seconds, while reducing the verification cost of zero-knowledge proofs by about 80%. This move will significantly improve the performance and cost-effectiveness of the Ethereum mainnet, further consolidate the leading position of stablecoins (such as USDC and USDT) on the mainnet, and promote an increase in daily Gas consumption, thereby enhancing the deflationary characteristics of ETH. In addition, the privacy protection mechanism of zkEVM will provide compliance support for traditional financial institutions, and is expected to stimulate DeFi scenarios involving institutions.

After the Ethereum Foundation made drastic adjustments to its management, it has indeed shown higher efficiency in R&D and execution, a clearer technical route, and a more agile community feedback mechanism. In particular, the bureaucratic atmosphere of "talking big but not doing big" that was often criticized in the past has eased, and the pace of development has significantly accelerated. However, judging from the on-chain data, both the income from gas fees and the overall transaction volume and activity are still significantly different from the peak of the bull market in 2021. Therefore, it is difficult to say that the current rapid growth of Ethereum prices comes from improvements in fundamentals or expectations of upgrades.

What are the holdings of ETH ETFs over the past year? Will ETH as an asset decouple from the mainnet fundamentals?

Since it is difficult to find strong support for this rise from Ethereum's own fundamentals, can we find out the motivation for Ethereum's rise and whether there is enough fuel in the future by looking into the ETF's holdings? If ETF becomes the new fundamental of Ethereum, can we say that ETH as an asset will be decoupled from the fundamentals of the mainnet?

It has been nearly a year since the U.S. SEC officially approved the Ethereum spot ETF on July 22, 2024. During this year, although ETH has successfully entered the mainstream financial investment system and became the second crypto asset to obtain U.S. spot ETF qualifications after Bitcoin, its market performance appears to be relatively stable, even slightly quiet. In the past 12 months, the average price of ETH has fluctuated around US$2,500, which is significantly lower than the position building cost of many spot ETF buyers. From the data of analyst Phyrex, it can be seen that the average purchase cost of institutional investors is concentrated above US$2,800, and some positions are even close to or above US$3,000. This means that the current market price of ETH is still in the "quilted" range, and the premium effect that should be brought about by the entry of mainstream financial funds has not yet been realized.

Source: Phyrex_Ni

Despite this, the continued increase in positions by institutions led by BlackRock still provides a strong signal to the market. As of now, U.S. spot ETF institutions hold a total of about 5.038 million ETH, of which BlackRock accounts for more than half, with a position of 2.461 million, and the net purchase volume this year is as high as 2.458 million. This concentrated holding pattern is highly similar to Bitcoin ETF, which also means that the "real demand" for ETH spot ETF is largely dominated by a few institutions, rather than contributed by a widely distributed investor group.

In contrast, although Fidelity and Grayscale are closely following, their investor behavior characteristics are obviously different. Fidelity users pay more attention to short-term fluctuations and tend to reduce positions at high levels and cover positions at low levels; Grayscale's impact on the overall market is gradually weakening due to its historical legacy structure (such as trust conversion). This has led to BlackRock playing a role similar to that of an "anchor" in the ETH price trend, and its investment decisions indirectly define the market's medium- and long-term expectations for ETH.

This phenomenon has also triggered a deeper discussion: the value perception of ETH as an asset is gradually shifting from "technical narrative" to "financial product positioning." In other words, the market's enthusiasm for ETH is not based solely on the growth potential of its decentralized applications or smart contract ecosystem, but is driven by how financial giants such as BlackRock package, promote and stabilize its price. To some extent, this evolution may weaken ETH's "crypto fundamentalist" value recognition, but it has brought it more lasting institutional funding support.

The difficulty of participating in the old DeFi is increasing, but the new direction has not yet arrived

Therefore, it can be said that as traditional financial markets gradually open up to crypto assets, Ethereum has gradually become an important target in the eyes of institutions. In addition to ETF products, many medium-sized institutions such as Sharplink have also begun to strategically hold ETH on their own, trying to gain a first-mover advantage in the new blockchain infrastructure landscape. The logic behind this wave of institutional layout is often not just about price games, but also a prediction of the future status of blockchain as a value storage and settlement layer.

However, unlike Bitcoin's "fixed total amount" design, Ethereum's supply model is more dynamic, which also determines that its "strategic reserve" attribute is logically contradictory. Bitcoin can be "bought out", but Ethereum cannot be "bought out" . The former is in line with the gold attribute of "hoarding value" because of its constant supply and absolute scarcity; while the latter is designed to maintain network security and operating incentives, and naturally has "liquidity", more like a means of production - this is also the core difference between "digital gold vs. digital oil".

Specifically, although Ethereum introduced a destruction mechanism after the London upgrade (EIP-1559) and achieved "basic deflation" after the merger, this mechanism is highly dependent on network activity. When the network is quiet and the transaction volume is insufficient, the destruction volume will be lower than the new issuance volume, resulting in a net increase in issuance. For example, in the past week, Ethereum has issued a net increase of about 16,000 ETH, and the 280,000 ETH held by Sharplink can be "diluted" in just four months at the current rate. This "unfinished" situation also means that if institutions rely solely on buying and hoarding, they cannot maintain the long-term "gold content" of their positions.

This brings up a deeper question: Why are institutions still willing to hold large positions in Ethereum?

The reason is that Ethereum is not only an asset, but also a platform. Once the ecosystem is active and Gas consumption is strong, its "consumption-based deflation" model will be activated, and ETH will become a scarce resource. In other words, the scarcity of ETH is not hard-coded in the code, but in the vitality of the ecosystem. For this reason, institutions that currently hold a large amount of ETH may have realized that promoting ecological prosperity is far more important than static holdings . Only when tracks such as DeFi and RWA are truly operational, the amount of ETH destroyed may continue to be higher than the additional issuance, returning to the logic of deflation, and creating a "golden" hoarding environment for institutions.

Therefore, the current ETH holding strategy may be a kind of "active waiting": laying out positions while promoting growth points in the forefront of the ecosystem.

ETH's "strategic reserve" is essentially different from BTC. It is not bought and put away, but must be "burned" after purchase. The ecological heat and application layer explosion are the key to ETH entering true deflation and achieving long-term value storage. Institutional holdings are essentially betting on the future ecology. Therefore, what is worth focusing on in the future is: Who will become the main force of Ethereum Gas consumption in the next wave? Which tracks will take the lead in forming structural opportunities?

The relationship between Bitcoin and the Bitcoin ecosystem is completely different from the relationship between Ethereum and the Ethereum ecosystem. The former can be completely decoupled because the value of Bitcoin has never been based on the development of its ecosystem. However , it is difficult for Ethereum to decouple in the long term. Even if it decouples in a short period of time due to institutional manipulation, it will eventually fall back to the value of the Ethereum ecosystem due to the reasons mentioned above.

At present, there is no substantial change in the fundamentals of Ethereum, that is, the ecosystem has not started new activities. If Ethereum and the mainnet cannot be decoupled, then the evaluation of the Ethereum ecosystem can only be based on the old DeFi for the time being, and observe whether the flywheel of the mainnet protocol has reached a new height and whether it can provide fundamental assistance to Ethereum. Here we mainly discuss the protocols on Ethereum that can generate natural income, and do not rely on a large number of radical incentives (such as high token subsidies) but obtain stable cash flow through real economic activities (such as transaction fees, loan interest, MEV, etc.):

1. Staking / LST related protocols

These protocols earn Ethereum verification revenue , which is one of the most basic natural sources of revenue.

• Lido : Obtain block rewards and fees by staking through custodial user ETH. The natural annualized return is about 3~4%.
• Rocket Pool , Frax ETH , Stader ETHx , etc. also have similar mechanisms.
• Source of income: consensus layer block rewards + MEV + network fees.

2. Decentralized lending protocol

Natural income comes from loan interest , that is, borrowers pay interest and depositors obtain the interest difference.

• Aave and Compound : Basic lending protocols with real interest rate market formation mechanisms.
• Morpho Blue : Pursuing high capital efficiency, using isolated market + peer-to-pool model.
• Source of income: interest paid by borrowers, and the agreement also collects a portion as platform income.

3. DEX

Natural income mainly comes from transaction fees .

• Uniswap V3 : LP provides liquidity and receives fees based on transaction volume.
• Curve : A low-slippage platform for trading stablecoins and other assets, with transaction fees + CRV incentives.
• Balancer : Multi-asset pool + dynamic fee model, with transaction fees as the main natural source of income.

4. Re-staking/MEV Protocol

Earn rewards by capturing MEVs or performing missions.

• EigenLayer : Perform additional tasks for validators (such as oracle verification, sorting services) to obtain additional benefits. Although there is no large-scale benefit release yet, the design goal is to capture the real AVS value.
• Revenue source: Service fees paid by future AVS customers.

5. Stablecoin Protocol (Non-Algorithmic)

Issue stablecoins through over-collateralization or asset-backed issuance and earn interest.

• MakerDAO : The minting of DAI requires the collateralization of assets such as ETH/USDC, and users pay interest; now there is also RWA income.
  • Source of income: Stability Fee paid by borrowers + RWA asset interest income (such as T-bills).
• Liquity (LUSD) : Borrowers pay a one-time fee (0.5%), and liquidation also generates income, which is distributed to Stability Pool users.

6. Re-staking LST Profit Aggregation Agreement

Improve LST returns through strategy automation, but not through subsidies.

• Pendle : Split the LST yield into principal/income stream, and users who buy future income create natural market returns.
• Ether.fi , Kelp DAO, Renzo (combined with EigenLayer) : are seeking natural yield re-staking services.

7. Real Asset (RWA) Protocol

The RWA protocol brings off-chain claims or government bonds onto the chain to generate income.

• Projects such as Ondo Finance , Maple Finance , Goldfinch , and Centrifuge are introducing real yield assets (such as bonds and institutional credit) onto the chain, with relatively stable returns.
• Source of income: interest paid by off-chain borrowers.

Old DeFi may achieve an 80% increase or even more during the 50% increase in ETH , but this places extremely high demands on retail investors or ordinary traders: not only do they need to enter the market before the project is recognized by the mainstream, but they also need to be able to identify the top and exit in time, while avoiding being trapped by false narratives or over-inflated valuations. The reality is that 90% of DeFi projects on the market find it difficult to continue to accumulate popularity and users throughout the cycle. Even if there is an over-inflation in the short term, it is mostly "theme-driven" rather than "fundamentals continue to strengthen."

In contrast, the logic of ETH itself in this cycle is clearer: on the one hand, the continuous injection of ETF funds provides solid price support for ETH; on the other hand, the underlying technical route of Ethereum (including EIP-7685, Verkle tree, Layer2, and pledge mechanism reform) is gradually implemented, and the long-term value foundation is constantly being consolidated. Although ETH's relative increase may not be as aggressive as some small currencies, it has the advantages of high certainty, low psychological pressure on holding positions, and abundant liquidity. It has become the most rational choice when the main line has not yet surfaced.

Instead of frequent trial and error in short-term hot spots, it is better to grasp the relative stability of ETH as a basic disk and wait for the new narrative to take shape. Once the main line is established, ETH is usually the first to benefit and the most directly linked large-cap target. For most investors, this strategy is not only easier to stick to, but also more likely to obtain systemic dividends at the end of the cycle.

Can ETH ETF Staking Make Ethereum Stand Out?

Since the Ethereum spot ETF was officially approved on July 22, 2024, its subsequent development direction, especially its linkage with the Ethereum staking mechanism, has always been one of the focuses of market attention. Recently, BlackRock submitted an application to introduce a staking function to its spot ETH ETF product, which triggered widespread discussion. This action was generally interpreted as an important signal that it had completed its initial position building and entered the stage of profit optimization.

According to the disclosed documents, if the ETF issuer is approved in the future, it will be able to perform ETH staking operations through multiple third-party staking service providers, including trading platforms such as Coinbase, or more Web3 native staking protocols such as Lido, EigenLayer and Puffer. It is worth noting that these protocols are currently actively launching compliant versions for institutions. For example, Puffer has direct investments from Fidelity and Franklin. This means that traditional financial institutions are gradually trying to institutionalize docking with crypto-native protocols to lower technical and compliance barriers.

According to the document, rewards from staking will be considered as income from the ETF trust, and the issuer can manage this part of the income at its sole discretion, and may only distribute a small portion of the dividend to investors. This mechanism will not only increase the potential rate of return of fund products, but will also significantly increase the profit margin of issuers. Previous studies have pointed out that in the context of the current annualized return of ETH staking of about 4% to 6%, the related income may even reach several times the ETF management fee, which is significantly attractive to issuers.

However, the document also clearly states that the issuer will not pledge the ETH it manages and the ETH held by other institutions or individuals in the same public pool, but will set up a dedicated pool for isolated management. This clause means that decentralized staking protocols such as Lido will find it difficult to directly benefit from ETF capital inflows if they do not provide customized solutions for institutions. If investors bet on these tokens based solely on the logic of "ETF staking", they need to fully consider the feasibility of the landing path and the difficulty of institutional cooperation.

In addition, the document also mentioned that the issuer will not bear the risks related to staking, including but not limited to the technical impact of slashing or chain forks. Although such exemption mechanisms are not uncommon in financial contracts, from the perspective of investor rights, we still need to be wary of the problem of asymmetric risk-return distribution: investors bear the systemic risks of ETH staking, but the distribution of returns and control rights are biased towards the issuer.

The signal revealed by the contradiction between ETH's short-term high and Bitcoin's medium- and long-term trend

At the end of this article, we look at Ethereum’s technical indicators, specifically, looking at the current profit levels of long and short-term holders to determine whether sentiment is overheated.

The floating profit chips ratio essentially measures the proportion of the current ETH circulating chips that are in a book profit state, which is logically similar to the classic on-chain indicator NUPL. The higher the profit ratio, the more investors hold "profitable chips". Once the market sentiment fluctuates, the greater the possibility of collective profit realization.

From the data of analyst @Murphychen888, it can be seen that as of July 18, 2025, this value has risen to 95% , approaching the historical high range. This highly concentrated floating profit state often appears in the overheated stage of the local market, and there is a significant overlap with the previous top area. Similar historical situations occurred in March, May and December 2024, when ETH entered a phased adjustment after a short-term surge at a high level.

When the floating profit reaches a high point, it indicates that the short-term trading sentiment is too saturated and may enter an adjustment at any time, which may take a few days or weeks. When the indicator starts to fall, it reflects that a large number of chips have turned into floating losses, and the market sentiment tends to be cautious, which also provides a healthier foundation for subsequent rises.

From a strategic perspective, simply relying on price trends to judge risks is not comprehensive, and more attention should be paid to the dynamic evolution of the market profit and loss structure . The current density of ETH profitable chips is indeed at a relatively high level in history, but if we combine the historical chip distribution, transaction depth and capital flow, there are no signs of systemic risks. In addition, macro factors such as the Fed's policy, the net inflow of spot ETFs, and the activity of the Ethereum ecosystem (such as the transaction volume and destruction rate on the Layer2 chain) will also greatly affect the evolution of the medium- and short-term market.

Overall, ETH's current position forms a delicate balance between risks and opportunities. The possibility of short-term market adjustments is indeed accumulating, but it does not yet constitute core evidence of a trend reversal.

Bitcoin's strength provides indirect support for Ethereum

In the process of evaluating Ethereum's subsequent performance, Bitcoin's on-chain structural changes and market behavior can often provide important indirect references. Especially in the context of the current macro liquidity expectations remaining loose and ETF products continuing to absorb spot, the evolution of Bitcoin's supply and demand relationship not only affects its own trend, but also guides mainstream assets such as ETH at the emotional and capital levels.

As of July 17, 2025, on-chain data shows that the total realized profit of Bitcoin has reached 4.3 billion US dollars , exceeding the interim highs in February and November 2024, indicating that a large number of investors have recently realized profit and exited the market. At the same time, the continuous increase in holdings by long-term holders since March this year has also begun to weaken, and there has been a phenomenon of gradually releasing chips to the market , which means that the supply structure of BTC is changing from "locked positions" to "circulation".

On the surface, this structural loosening may be seen as a signal of potential pressure. However, it is worth noting that despite the large amount of profit realization in the market, the price of BTC has not experienced a significant correction , indicating that the current market buying is still resilient and has a strong ability to absorb selling pressure in the short term. The existence of this "high-level carrying capacity" has also alleviated the systemic pressure of the ETH market to a certain extent, providing confidence support for its price increase.

In fact, this "high-level carrying capacity" allows Bitcoin to achieve uniform accumulation of chips at a continuously high level. In my analysis in May, I mentioned that the continued market expectations during the interest rate cut cycle prevented the a posteriori indicators from triggering a "bear market". Now it may be appropriate to add the second half of the sentence. Bitcoin has formed a uniform chip range, which prevents the bull market peak signal from being triggered.

Specifically, BTC oscillates repeatedly within a certain price range, continuously absorbing chips and forming a high-density chip accumulation area . The formation of this structure has the following significant characteristics:

1. The "accumulation zone" forms price attraction during a pullback : even if the price falls below this range for a short period of time, since most of the holders are long-term accounts that "do not want to sell at a loss", the change of chips is limited, and the price often returns to this zone in the end;
2. After the price breaks through, it enters a new range : When the price rises strongly and leaves the original chip area, the new range will gradually form a new "chip balance" and build the technical support for the next stage;
3. Continuous turnover drives structural optimization : Each round of upward breakthrough process also continuously completes the turnover of chips below, which is conducive to the continuation of long-term trends.

This rhythm of "repeated shocks → chip accumulation → breakthrough turnover" means that the current Bitcoin market presents a stable upward structure with convergent fluctuations . Under this structure, as long as there is no major external negative impact (such as macro black swans or on-chain security incidents), the price of Bitcoin has strong stability.

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Disclaimer:

This article/blog is for informational purposes only and represents the personal opinions of the author and does not necessarily represent the position of Movemaker. This article is not intended to provide: (i) investment advice or investment recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; or (iii) financial, accounting, legal or tax advice. Holding digital assets, including stablecoins and NFTs, is extremely risky and may fluctuate in price and become worthless. You should carefully consider whether trading or holding digital assets is appropriate for you based on your financial situation. If you have questions about your specific situation, please consult your legal, tax or investment advisor. The information provided in this article (including market data and statistical information, if any) is for general information only. Reasonable care has been taken in the preparation of these data and charts, but no responsibility is assumed for any factual errors or omissions expressed therein.