Arkham's latest analysis suggests that Ethereum is entering a new phase where its dominance alone is no longer the primary determinant for investors. The critical question now revolves around whether value will continue to flow back to the Layer-1 (L1) network as Layer-2 (L2) ecosystems experience significant growth.
For Arkham, Ethereum's underperformance relative to Bitcoin during the 2024-2025 cycle is not an isolated incident. Despite increased institutional adoption, substantial ETF inflows, and major firms adding ETH to their balance sheets, the price trend has lagged. According to the researchers, market hesitation stems not from security concerns or lack of demand, but from uncertainty regarding the amount of value that will ultimately return to the L1.
The L2 Debate Takes Center Stage
Rollups have effectively addressed the scaling challenges that plagued Ethereum in previous cycles. Transaction capacity has dramatically increased, fees have decreased, and a multitude of L2 economies have emerged on top of the network. Arkham observes that this progress has ignited a new debate: as activity increasingly shifts to rollups, will the value that fuels the ecosystem flow back to ETH, or will rollups retain most of it internally?
The report posits that investor confidence in ETH is now intrinsically linked to the answer to this question, superseding traditional metrics such as Total Value Locked (TVL), development activity, or institutional demand.
Fusaka Arrives as a High-Stakes Test
The next significant development in Ethereum's evolution is the Fusaka upgrade, scheduled to go live on December 3rd. This update is engineered to enhance Ethereum's modularity and its rollup-centric design, thereby expanding the network's data processing capabilities and reducing costs for L2 chains.
Fusaka will increase blob capacity, raise gas thresholds, and implement PeerDAS and decentralized data sampling to boost throughput. Arkham views this not merely as a cosmetic enhancement, but as a critical stress test for Ethereum's long-term economic model. If rollups continue to strengthen without diminishing value circulation on the main chain, Ethereum could solidify its position for years to come. Conversely, if this does not occur, the shift towards L2s might foster an ecosystem where the infrastructure relies on Ethereum, but the economic benefits are no longer concentrated at the base layer.
The Narrative Ethereum Must Re-Establish
Arkham concludes that Ethereum's forthcoming phase will be influenced by factors extending beyond short-term market sentiment. The "digital oil" narrative – the concept that ETH is indispensable for economic activity across decentralized finance – must be re-validated within a more modular architecture. The strength of the tokenized-asset economy, the trajectory of gas and data-availability costs, and the pace of traditional finance integration all play a role in determining the balance of power between L1 and L2.
If the post-Fusaka era demonstrates that increased scalability benefits both the base chain and the rollups built upon it, Ethereum could not only defend but also expand its influence in the global digital-asset economy. However, Arkham warns that if this outcome is not achieved, Ethereum may retain its critical importance but cease to be the primary beneficiary of its own success.