Ethereum User Count is Increasing, JPMorgan Warns

Recent developments on the Ethereum (ETH) network have increased investor interest. Currently trading at $2,992, Ethereum has seen a significant increase in transaction traffic with the new Fusaka upgrade, which has also caused a surge in the number of users.

JPMorgan, one of Wall Street's leading banks, assessed the effects of the upgrade in a published analysis report. They noted that the Fusaka upgrade has expanded the network's data capacity and reduced transaction fees, stating that these changes have created a noticeable jump in the number of active addresses. However, analysts emphasized that excitement following similar technical innovations in the past has generally been short-lived and tends to fade over time.

The Fusaka upgrade increased the data space per block, allowing layer-2 networks to conduct transactions at lower costs. This has reduced network congestion, enabling users to execute transactions at more favorable prices. While these developments are acknowledged to have positive short-term results, they express that it may be challenging for these changes to transition into sustainable growth trends.

Moreover, a significant threat faced by Ethereum is the intense competition created by alternatives like Solana (SOL), which are more advantageous in terms of speed and cost. The popularity of layer-2 networks such as Base, Arbitrum, and Optimism is leading to a shift in revenues from Ethereum's main network to these platforms. JPMorgan analysts indicate that important projects such as Uniswap and dYdX transitioning to their own dedicated chains is fragmenting the liquidity of the Ethereum network, resulting in a decrease in burned transaction fees.

In this scenario, the increase in the circulating supply of ETH and the decline in the total value locked in the network have the potential to pressure the long-term price outlook. As a result, it is important for investors to closely monitor Ethereum's current competitive situation and potential technical developments.