Introduction Good morning, crypto investors, and welcome to your BitMorpho Daily News & Fundamentals Report for Wednesday, December 10, 2025. The crypto market is riding a wave of optimism today, primarily driven by anticipation surrounding the conclusion of the Federal Reserve's December FOMC meeting, where a widely expected 25 basis point rate cut is on the docket. Bitcoin has rallied, briefly reclaiming the 94,000 mark, but it’s Ethereum (ETH) that is showing decisive outperformance, surging over 6% to trade north of 3,300. This positive shift has seen the ETH/BTC pair break a three-month downtrend, which some analysts are flagging as an early signal for renewed altcoin momentum. Fundamental tailwinds are strongly supporting ETH's move: on-chain data reveals that Ethereum's centralized exchange reserves have plunged to a historic low of around 8.7% of total supply, indicating a significant shift of assets into staking, restaking, and Layer 2 ecosystems, creating a potential supply-demand imbalance. This scarcity narrative is a powerful counterpoint to any immediate bearish signals, such as a large whale deposit into Binance recorded earlier this month. Macroeconomically, the focus remains glued to the Fed’s final commentary, as Chair Powell's remarks following the rate decision will set the tone for 2026 policy, especially given internal committee divisions and political intrigue surrounding the next Fed Chair nomination. Furthermore, key US inflation and employment data (CPI/PPI) for November has been delayed until next week due to the recent government shutdown, leaving policymakers to lean on older figures and current market sentiment. For now, the market is pricing in the cut, and ETH's supply dynamics are leading the charge upward. We will be closely monitoring Powell’s press conference for any forward guidance that could impact liquidity conditions. News Analysis ETH Outperforms as Supply Shock Meets Macro Hopes Ethereum is carving out a clear lead over the broader crypto market today, breaking decisively above the $3,300 mark following a significant six percent surge. This outperformance signals a potential shift in capital rotation back toward established Layer-1 assets, with the ETH/BTC pair breaking a multi-month downtrend, a historical precursor to renewed altcoin momentum. Supply Scarcity Drives Price Action The primary fundamental driver behind ETH’s current rally is an increasingly tight supply profile. As noted in the introduction, Ethereum’s centralized exchange reserves have plummeted to a historic low, now standing at approximately 8.7% of the total supply. This dramatic reduction strongly suggests that assets are being permanently removed from readily available markets, migrating into staking, restaking protocols, or Layer-2 ecosystems. This dynamic creates a powerful, organic supply-demand imbalance that is insulating ETH from broader market jitters. While some on-chain activity on the base layer has recently cooled with 30-day network fees dropping by 62% and Total Value Locked (TVL) falling from 100 billion to 76 billion in the last two months this is increasingly viewed as a feature, not a bug. The *Fusaka* upgrade, which launched earlier this month, is making Layer-2 solutions like Base and Polygon significantly more efficient, pulling transaction volume and fees off the mainnet while preserving the base layer as a secure settlement environment. Ecosystem Maturity and Institutional Growth Ethereum’s infrastructure continues to mature, paving the way for greater institutional integration. The successful activation of the Fusaka upgrade on December 3rd has demonstrably improved the network's ability to handle data for Layer-2 rollups, with the first subsequent Blob Parameter Only (BPO) fork already implemented on December 9th, increasing per-block data capacity. This scaling work is occurring in parallel with clearer regulatory pathways in some jurisdictions. For instance, reports indicate that European firms are launching regulated investment vehicles, such as WisdomTree’s fully staked ETH ETP (LIST), leveraging clear regulatory frameworks for physically-backed crypto ETPs that hold staked assets like stETH. Furthermore, in the US, reports suggest that the Office of the Comptroller of the Currency (OCC) confirmed that banks may legally conduct "riskless principal" transactions in crypto assets, a move that could disproportionately benefit major assets like Ethereum. Community sentiment remains supportive, evidenced by increased development activity across the ecosystem, with key protocols like Chainlink showing robust code commits, signaling continued long-term building conviction. Even as base-layer DApp TVL has softened, the network's overall dominance in the DeFi space remains strong at approximately 68% market share. The Fed Hangs in the Balance For macro traders, the narrative remains centered on the Federal Reserve's FOMC meeting concluding today. With the market overwhelmingly pricing in the expected 25 basis point rate cut, attention is fixed squarely on Chair Powell’s press conference. The anticipated dovish tone, driven in part by weaker recent employment data, is acting as a strong tailwind for risk assets like ETH. However, the underlying political environment surrounding monetary policy remains tense, with public commentary on expected rate actions filtering through from Washington. The final guidance from Powell on the outlook for 2026 liquidity conditions will be crucial in determining whether ETH can maintain this upward momentum beyond the current supply-driven rally. Any indication of future policy tightening, despite the expected cut today, could challenge the current optimism. Outlook Conclusion: Ethereum's Scarcity Narrative Solidifies Leadership Ethereum's decisive break above $3,300 underscores a potent combination of robust fundamentals and improving macro sentiment. The prevailing narrative for ETH is decidedly Positive, driven primarily by the historic lows in centralized exchange reserves. This supply shock suggests long-term conviction among holders, effectively creating an organic floor for the asset that insulates it from typical market volatility. While on-chain activity on the mainnet has moderated a natural consequence of the successful Fusaka upgrade shifting volume to more efficient Layer-2s like Base and Polygon this structural maturation is seen by many as a net positive for the network's long-term scalability and institutional appeal. The breaking of the ETH/BTC downtrend further signals that capital may be beginning its rotation back toward established Layer-1 leaders. For the immediate future, investors should closely monitor whether this upward momentum can sustain itself above the $3,300 pivot point over the next 24 to 48 hours. Continued strength in the ETH/BTC pair, alongside sustained developer activity on Layer-2s benefiting from the recent protocol upgrade, will be key indicators of whether this outperformance is set to continue. *Disclaimer: This report reflects current market observations and should not be construed as financial advice. Always conduct your own thorough research before making investment decisions.*