Ethereum is currently in a crucial phase marked by a combination of improving technical signals, large-scale technological upgrades, and increasingly clear regulatory support. In recent weeks, this second-largest cryptocurrency has shown indications of a bullish rotation, particularly as the market begins to test crucial technical levels that often determine the direction of medium- to long-term trends.
One of the most prominent signals comes from the movement of the ETH ratio against Bitcoin. Over three consecutive weeks leading up to mid-December 2025, Ethereum's dominance over Bitcoin continued to rise, with the ETH/BTC pair approaching the 0.30 area. Historically, this level has often been a trigger for a broader altcoin rally. This phenomenon was reinforced by the accumulation activity of large wallets, where whales were noted to have purchased Ethereum worth more than 140 million US dollars within two weeks. This movement occurred alongside Bitcoin's dominance falling below 60 percent, a condition often interpreted as a signal of shifting investor risk appetite. This indication opens up the possibility that institutions are beginning to view Ethereum as an asset with more attractive growth potential heading into 2026. Nevertheless, this rally remains overshadowed by macroeconomic uncertainty, especially as Bitcoin's recovery following a sharp decline remains fragile and could limit Ethereum's upside if global sentiment deteriorates again.
From a technological fundamental perspective, Ethereum also recorded significant progress through the activation of the Fusaka hard fork in early December 2025. This update introduced PeerDAS, a mechanism that allows nodes to sample data without having to store the entire block. This innovation directly enhances network efficiency, with plans to increase blob capacity from six to fourteen per block by January 2026. As a result, transaction costs on the Layer-2 network are expected to decrease by around 40 percent. This scalability improvement serves as an important foundation for DeFi adoption and institutional applications that have been sensitive to costs and network capacity. Although the development process faced technical challenges, such as validator bugs during the devnet stage, Fusaka is still viewed as a crucial step in strengthening Ethereum's competitiveness. However, it should be noted that this upgrade does not directly change Ethereum's monetary policy, so its effects are more felt on network utility rather than supply aspects.
Another factor that strengthens the positive narrative of Ethereum comes from the regulatory realm, particularly regarding stablecoins. On December 12, 2025, Circle obtained a national bank charter approval from the Office of the Comptroller of the Currency (OCC). With this status, USDC can conduct direct settlements through Federal Reserve accounts, thus no longer fully relying on commercial banks as intermediaries. This move significantly reduces partner risk, especially considering the bitter experience of USDC's depeg in March 2023 due to the collapse of Silicon Valley Bank. With the decreased systemic risk in the USDC ecosystem, valued at about 19 billion USD and largely operating on Ethereum, the network's position as a center of stablecoin activity is further strengthened. Nevertheless, the potential presence of a digital dollar token directly linked to the Federal Reserve remains a challenge, as it could pressure Ethereum's transactional utility in the long run.
Overall, the combination of technological advancements through the Fusaka upgrade, signals of capital rotation from Bitcoin to Ethereum, and regulatory support for stablecoins forms a strong foundation for Ethereum entering 2026. However, a key question still hangs: to what extent can Ethereum leverage this momentum if global liquidity conditions tighten again after the Federal Reserve's interest rate cut cycle ends? The answer to this question will likely determine Ethereum's direction in the next market phase.
