Ethereum: A New Landscape Led by Institutions

In the past week, Ethereum achieved a weekly increase of 26.4%, breaking through the $2800 resistance level and approaching the $4000 mark. This round of ETH's upward structure is more akin to the institution-led BTC pattern, characterized by a combination of gradual ascents and strong surges, rather than the typical retail bull market pattern. This pattern allows for the digestion of profit chips during high-level consolidation, reducing risk indicators.

Even if the percentage of profitable supply reaches the peak levels of previous bull markets, the rise led by institutions may no longer follow the retail bull market pattern, but rather tend towards a stable upward trend of Bitcoin, leading to a decrease in the percentage of profitable supply during horizontal consolidation at high levels.

Ethereum's Major Upgrades in the Future

1. Lower the verification threshold and promote the popularity of light nodes.

Ethereum plans to launch a verification mechanism optimization project in the second half of 2025, with core initiatives including:

• Gradually reduce the staking requirement from 32 ETH to 16 ETH, or even 1 ETH.
• Optimize the staking mechanism to increase the annualized return rate to 6%-8%
• Introduce lightweight node verification mode to lower participation thresholds.
• Drive the staking rate above 40%, lock up over 48 million Ether
• Reduce circulating supply, strengthen deflationary trend

2. Achieve integration of mainnet and L2 cross-chain liquidity

Scheduled to launch by the end of 2025, with improvements in 2026-2027. The objectives include:

• Break the interaction barriers between the mainnet and major L2 networks
• Integrate decentralized capital pools to increase the total locked amount to over 200 billion USD.
• Reduce cross-layer transaction costs by 90%, achieving second-level confirmation.
• Improve the capital efficiency of DeFi protocols and promote the collaboration between the mainnet and L2.

3. Reshaping the Ethereum Virtual Machine with RISC-V Architecture

Plan to start R&D in the second half of 2025, with phased implementation from 2026 to 2030, core objectives:

• Increase the execution speed of smart contracts by 3 to 5 times.
• Gas fees reduced by over 50%
• Adapt to modern hardware acceleration technology
• Supports high concurrency scenarios, such as high-frequency trading, real-time gaming, etc.

4. The mainnet introduces zkEVM

The mainnet deployment is expected to be completed by the end of 2025 to mid-2026, with goals including:

• 99% of blocks are validated within 10 seconds
• Reduce verification costs of zero-knowledge proofs by approximately 80%
• Improve mainnet performance and cost-effectiveness
• Consolidate the status of stablecoins on the mainnet
• Provide compliance support for institutions participating in DeFi

Although the Ethereum Foundation has improved management and research and development efficiency, on-chain data shows that gas fee revenue, transaction volume, and activity levels still have a significant gap compared to the peak of the bull market in 2021. Therefore, it is difficult to regard the current rapid price increase as stemming from improvements in fundamentals or expectations of upgrades.

Analysis of ETH ETF Holdings

Since the approval of the Ethereum spot ETF by the US SEC on July 22, 2024, the ETH market has performed relatively steadily. Over the past 12 months, the average price of ETH has fluctuated around $2500, below the entry cost for most ETF buyers. Institutional investors' average buy-in cost is concentrated above $2800, with some nearing $3000.

As of now, US spot ETF institutions hold approximately 5.038 million ETH, of which BlackRock accounts for 2.461 million, with a net purchase of 2.458 million this year. This concentrated holding pattern is similar to that of Bitcoin ETFs, indicating that the demand for ETH spot ETFs is primarily driven by a few institutions.

BlackRock plays the role of a "stabilizer" in the ETH price trend, with its investment decisions indirectly defining the market's medium- to long-term expectations for ETH. This has sparked a discussion: the perception of ETH's asset value is shifting from "technological narrative" to "financial product positioning". Market enthusiasm is no longer solely based on the potential of decentralized applications, but rather driven by how financial giants package, promote, and stabilize prices.

Ethereum Ecosystem Status

The current fundamentals of Ethereum have not undergone significant changes, and the activity level of the ecosystem has not seen obvious improvement. Assessing the Ethereum ecosystem still requires attention to the performance of major DeFi protocols:

1. Staking / LST related protocols

   • Lido, Rocket Pool, Frax ETH, etc.
   • Sources of income: consensus layer rewards, MEV, network fees

2. Decentralized Lending Protocol

   • Aave, Compound, Morpho Blue, etc.
   • Source of income: Borrower pays interest

3. DEX

   • Uniswap V3, Curve, Balancer, etc.
   • The income mainly comes from transaction fees

4. Re-staking / MEV Protocol

   • EigenLayer, etc.
   • Future income source: service fees paid by AVS customers

5. Stablecoin Protocol ( non-algorithm )

   • MakerDAO, Liquity, etc.
   • Sources of income: stability fees, RWA asset interest, etc.

6. Re-staking LST Yield Aggregation Protocol

   • Pendle, Ether.fi, Kelp DAO, etc.
   • Seek natural yield re-staking services

7. Real Assets ( RWA ) Protocol

   • Ondo Finance, Maple Finance, etc.
   • Source of income: Interest paid by off-chain borrowers

Old DeFi projects may achieve higher gains during the rise of ETH, but they have very high requirements for retail investors. In contrast, the logic of ETH itself is clearer: the injection of ETF funds provides price support, and the underlying technology roadmap is gradually being implemented. ETH excels in high certainty, low holding pressure, and ample liquidity, making it a more rational choice currently.

Analysis of the Impact of ETH ETF Staking

BlackRock recently applied to introduce ETH ETF staking functionality, which is seen as a signal of entering the yield optimization stage. The main content includes:

• Staking ETH through multiple third-party service providers
• Staking rewards are considered ETF trust income, and the issuer can manage it in full.
• A dedicated pool needs to be established for isolated management, not to be combined with other institutions or individuals for concentrated ETH staking.
• The issuer does not bear the risks related to staking, such as penalties or chain forks.

This mechanism may enhance the potential yield of fund products and the profit margin for issuers, but it also poses the risk of asymmetric risk-reward distribution.

Technical Indicator Analysis

As of July 18, 2025, the proportion of floating profits in ETH has reached 95%, close to historical highs. This highly concentrated floating profit state often appears during periods of overheating in the local market, indicating that short-term trading sentiment may be saturated.

However, solely relying on price trends to assess risks is not comprehensive; it is necessary to consider factors such as historical chip distribution, trading depth, and capital flow. Currently, there are no signs of systemic risk for ETH, but the possibility of a short-term market adjustment is accumulating.

On-chain data for Bitcoin shows:

• The total realized profit reached 4.3 billion USD, exceeding the previous high.
• Long-term holders' accumulation behavior weakens, starting to release chips to the market.
• Despite the large profit-taking, the BTC price has not shown a significant pullback, indicating the resilience of buying pressure.

The BTC market is showing a rhythm of "repeated fluctuations → chip accumulation → breakthrough turnover", forming a stable upward structure in the converging volatility. Under this structure, the BTC price operates with strong stability, providing indirect support for the ETH market.