Trend Research: The "Blockchain Revolution" is underway, remaining bullish on Ethereum

Original Title: "The 'Blockchain Revolution' in Progress, Remaining Bullish on Ethereum"

Original Source: Trend Research

Since the market crash on October 11, the entire crypto market has been lackluster, with market makers and investors suffering heavy losses. The recovery of capital and sentiment will take time. However, what the crypto market lacks least is new volatility and opportunities, and we remain optimistic about the future. This is because the trend of mainstream crypto assets merging with traditional finance into a new ecosystem has not changed; in fact, during market downturns, this moat is being rapidly built up.

I. Strengthening Wall Street Consensus

On December 3, Paul Atkins, Chairman of the US SEC, stated in an exclusive interview at the New York Stock Exchange with FOX: "In the coming years, the entire US financial market may migrate on-chain."

Atkins stated:

(1) The core advantage of tokenization is that if assets exist on the blockchain, the ownership structure and asset attributes will be highly transparent. Currently, listed companies often do not know exactly who their shareholders are, where they are located, or where the shares are.

(2) Tokenization is also expected to achieve "T+0" settlement, replacing the current "T+1" trading settlement cycle. In principle, on-chain Delivery versus Payment (DVP) / Receive versus Payment (RVP) mechanisms can reduce market risk and improve transparency, while the current time lag between clearing, settlement, and fund delivery is one of the sources of systemic risk.

(3) He believes tokenization is an inevitable trend in financial services, and mainstream banks and brokers are already moving in this direction. It may not even take 10 years for the whole world... perhaps it will become a reality in just a few years. We are actively embracing new technologies to ensure the US maintains a leading position in fields such as cryptocurrency.

In fact, Wall Street and Washington have already built a deep capital network in crypto, forming a new narrative chain: US political and economic elites → US Treasuries → Stablecoins / Crypto Treasury Companies → Ethereum + RWA + L2

From this chart, you can see the Trump family, traditional bond market makers, the Treasury Department, tech companies, and crypto companies intricately connected, with the green oval lines forming the main trunk:

(1) Stable Coin (USDT, USDC, USD assets behind WLD, etc.)

The bulk of reserve assets are short-term US Treasuries + bank deposits, held through brokers like Cantor.

(2) US Treasuries

Issued and managed by the Treasury/Bessent side, used by Palantir, Druckenmiller, Tiger Cubs, etc. as low-risk interest rate base positions, and are also yield assets pursued by stablecoin/treasury companies.

(3) RWA

From US Treasuries, mortgages, accounts receivable to housing finance, tokenization is achieved through Ethereum L1/L2 protocols.

(4) ETH & ETH L2 Equity

Ethereum is the main chain for RWA, stablecoins, DeFi, and AI-DeFi. L2 equity/tokens represent claims on future trading volume and fee cash flows.

This chain expresses:

US dollar credit → US Treasuries → Stablecoin reserves → Various crypto treasuries / RWA protocols → Ultimately settled on ETH / L2.

From the TVL of RWA, compared to other public chains that declined after October 11, ETH is the only public chain that quickly recovered and rose. Currently, TVL is 12.4 billions, accounting for 64.5% of the total crypto volume.

II. Ethereum's Value Capture Exploration

Recently, the Ethereum Fusaka upgrade did not cause much stir in the market, but from the perspective of network structure and economic model evolution, it is a "milestone event." Fusaka is not just about scaling through PeerDAS and other EIPs, but attempts to solve the problem of insufficient value capture by the L1 mainnet caused by L2 development.

Through EIP-7918, ETH introduces the blob base fee as a "dynamic floor price," binding its lower limit to the L1 execution layer base fee, requiring blobs to pay DA fees at a unit price at least about 1/16 of the L1 base fee; this means Rollups can no longer occupy blob bandwidth at almost zero cost for the long term, and the corresponding fees will be burned and returned to ETH holders.

There have been three Ethereum upgrades related to "burning":

(1) London (single dimension): Only burns the execution layer, and ETH begins to experience structural burning due to L1 usage.

(2) Dencun (dual dimension + independent blob market): Burns execution layer + blob. L2 data written into blobs also burns ETH, but when demand is low, the blob portion is almost zero.

(3) Fusaka (dual dimension + blob bound to L1): To use L2 (blob), you must pay at least a fixed proportion of the L1 base fee, which is burned. L2 activity is more stably mapped to ETH burning.

Currently, blob fees in the one hour at 23:00 on December 11 have reached 569.63 billions times the pre-Fusaka upgrade level, with 1,527 ETH burned in one day. Blob fees have become the highest contributor to burning, accounting for as much as 98%. As ETH L2 becomes more active, this upgrade is expected to return ETH to deflation.

III. Ethereum's Technical Strengthening

During the October 11 drop, ETH futures leveraged positions were fully cleared, eventually reaching spot leveraged positions. At the same time, many with insufficient faith in ETH, including many ancient OGs, reduced their positions and fled. According to Coinbase data, speculative leverage in the crypto space has dropped to a historical low of 4%.

In the past, an important part of ETH shorts came from the traditional Long BTC/Short ETH pair trade, which generally performed very well during the last bear market. However, this time, something unexpected happened. The ETH/BTC ratio has been in a sideways resistance pattern since November.

Currently, there are 13 million ETH on trading platforms, about 10% of the total supply, at a historical low. As the Long BTC/Short ETH pair has failed since November, during periods of extreme market panic, there may gradually emerge a "short squeeze" opportunity.

As we approach 2025–2026, both China and the US have sent friendly signals regarding future monetary and fiscal policies:

The US will be proactive, cutting taxes, lowering interest rates, and relaxing crypto regulation. China will be moderately accommodative, maintaining financial stability (suppressing volatility).

With relatively loose expectations in both China and the US, and in a scenario where asset downside volatility is suppressed, during periods of extreme panic when capital and sentiment have not fully recovered, ETH remains in a good "batting zone" for buying.