Fundamental Overview Deep Dive Fundamental Analysis: Ethereum (ETH) Introduction As a long-term investor focused on structural technology adoption and robust tokenomics, our analysis of Ethereum (ETH) transcends short-term market fluctuations. Ethereum represents the foundational settlement layer for the decentralized economy, maintaining its position as the dominant smart contract platform despite evolving competitive pressures. Its core value proposition lies in its unmatched decentralization, security, and the established network effects underpinning Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), and the burgeoning sector of tokenized Real-World Assets (RWA). As of December 2025, Ethereum remains the clear second-largest cryptocurrency by market capitalization, with reports indicating a valuation exceeding $353 billion and a circulating supply of approximately 120.7 million ETH. This market positioning is critical, though its dominance percentage fluctuates against Bitcoin. The Total Value Locked (TVL) in DeFi protocols built upon Ethereum continues to anchor its utility, showcasing its function as the primary collateral and settlement asset in Web3. The "Big Picture" narrative for ETH has recently centered on infrastructural maturity and regulatory clarification. Key network upgrades, such as the Pectra upgrade in May 2025 and the recent December 2025 Fusaka upgrade, mark significant strides in scaling and, crucially, in repairing the L1 value capture mechanism between the execution layer and Layer 2 solutions. Regulatory clarity, notably the legal definition of ETH as a digital commodity by U.S. agencies in 2025, de-risks institutional engagement, which is further accelerated by ongoing spot ETF flows. This report will conduct a deep dive into the sustainability of post-Fusaka revenue models, the evolving competitive moat against high-throughput chains, and the long-term implications of locked supply driven by staking and institutional accumulation. Deep Dive Analysis Deep Dive Fundamental Analysis: Ethereum (ETH) Tokenomics: Rebalancing Value Capture The tokenomics of Ethereum are fundamentally defined by the interplay between Proof-of-Stake (PoS) issuance, the EIP-1559 burn mechanism, and the recent infrastructural fixes. Post-Merge, ETH issuance to validators is low, driving a staking yield that, as of December 2025, has attracted significant participation. Reports indicate that over 35.7 million ETH (approximately 29.8% of the total supply) is currently staked, reinforcing network security and providing institutional yields. This staking activity acts as a significant supply sink. The EIP-1559 burn mechanism was designed to make ETH deflationary when network activity is high, by permanently removing the base fee from circulation. However, the scaling of Layer 2 (L2) solutions in early 2025, while beneficial for end-users, created an "income paradox" where L2s captured most transaction revenue while paying negligible "rent" to the L1. This led to the annualized supply growth rate briefly rebounding to +0.22% in Q3 2025, effectively weakening the deflationary narrative. The December 2025 Fusaka upgrade specifically addressed this by introducing EIP-7918, which ties the cost of L2 data (Blobs) to L1 gas fees. This new "B2B tax model" establishes a sustainable L1 value capture, expected to drastically increase the burn rate and re-establish a strong path toward net deflation. There are no public vesting schedules as the supply issuance is determined by staking requirements and the burn mechanism based on network demand. On-Chain Metrics: Resilient Utility Despite a challenging price period in 2025, the underlying utility of Ethereum remains robust. The Total Value Locked (TVL) in Ethereum DeFi protocols anchors its position, with Ethereum holding nearly 68.2% of global DeFi TVL, which amounted to over 69 billion in late 2025. Furthermore, stablecoin value on Ethereum surged to 165.13 billion in 2025, representing 53.3% dominance of the stablecoin market. Network activity shows clear signs of resurgence in December 2025. The number of daily active addresses is currently around 797,280, marking a 38.38% increase from one year prior. Monthly transaction counts have also risen by 16%, reaching 11.3 million transactions, with overall transaction volume at an all-time high, signaling strong underlying demand for blockspace, primarily driven by L2 activity. Conversely, average gas fees have reportedly fallen to as low as $0.38 due to scalability efforts, which benefits users but tempers the burn rate from transaction fees. Crucially, the liquid supply on centralized exchanges has plummeted, with the supply dropping 45% in the last six months to a nine-year low of 10.2 million ETH, indicating significant accumulation and reduced immediate selling pressure. Ecosystem & Roadmap: Maturity Through Upgrades The year 2025 was marked by significant infrastructural maturity, successfully shipping two major protocol upgrades: Pectra (May 2025) and Fusaka (December 2025). Pectra introduced EIP-7702, allowing for flexible wallet functionality like transaction batching. Fusaka, as detailed above, fixed the L1 value capture mechanism. Developer activity remains high, focused on leveraging these upgrades for further scaling and institutional integration. The ecosystem is increasingly shifting its focus from pure transaction throughput to acting as a secure "Trustware" settlement layer for high-value assets, including tokenized Real-World Assets (RWA), which grew to $12.18 billion in 2025. Competitive Landscape: The Settlement Layer Moat Ethereum’s competitive positioning is increasingly defined by its security, decentralization, and network effects, rather than raw transaction speed, which is increasingly handled by L2s. While high-throughput chains continue to dominate high-frequency retail applications, Ethereum is solidifying its role as the secure settlement layer for DeFi, institutional finance, and RWA tokenization. The introduction of spot ETH ETFs in mid-2024, with consistent inflows, further locks in institutional capital, making Ethereum a compliance-friendly asset class. The core value proposition has evolved from being the fastest L1 to being the most trusted base layer, supported by its significant staked supply and regulatory clarity defining ETH as a digital commodity. Verdict Conclusion: Ethereum (ETH) Fundamental Analysis Ethereum's fundamental profile remains structurally strong, pivoting on its dominant position in decentralized finance (DeFi) and significant network security provided by Proof-of-Stake. The network commands considerable utility, evidenced by its near 68.2% share of global DeFi Total Value Locked (TVL), exceeding $69 billion in late 2025, and a substantial portion of circulating stablecoins. This high utility underpins long-term demand. The primary narrative shift centers on tokenomics following the Q3 2025 supply growth rebound. The introduction of EIP-7918 via the Fusaka upgrade is the most critical recent development, designed to correct the L2 "income paradox" by linking L2 data costs back to L1 fees. This new model is expected to significantly boost the burn rate, reasserting a strong deflationary trend, which is a major catalyst for value accrual. However, the temporary weakening of the deflationary model and the ongoing reliance on L2 adoption for revenue present immediate risks. Long-Term Verdict: Undervalued. The combination of established utility, high staking adoption (nearly 29.8% of supply staked), and the successful implementation of EIP-7918 creating a sustainable L1 value capture mechanism suggests that current market pricing may not fully reflect the potential for increased net deflation and sustained network security. Biggest Growth Catalysts: Successful re-establishment of net deflation via EIP-7918, and continued DeFi/stablecoin dominance. Biggest Risks: Slower-than-anticipated L2 revenue realization, and potential regulatory headwinds facing the staking ecosystem. *** *Disclaimer: This analysis is for informational and educational purposes only and does not constitute financial advice. Always conduct your own thorough research before making investment decisions.*