Ethereum Fusaka Upgrade Slashes Gas Fees, Raises Inflation Concerns

Published: 2025-12-21 19:45:53 |

Ethereum activated the Fusaka upgrade (merging Fulu consensus and Osaka execution) on December 3, 2025. The upgrade introduces PeerDAS (Peer Data Availability Sampling) and raises the block gas limit by 33% (from 45M to 60M). As a result, average mainnet gas fees for simple transfers have fallen to roughly $0.01–$0.10. The lower fees make Ethereum Layer‑1 economically competitive with high‑speed chains such as Solana. However, reduced fee burns under EIP‑1559 have decreased ETH burn rates, creating short‑term inflationary pressure. Market sentiment remains in “Extreme Fear” (index ~21) as bulls defend the $3,000 support level. Proponents argue the long‑term benefit is enabling ultra‑low‑cost settlement for tokenized Treasury bills and stablecoins, positioning Ethereum as a backbone for Global Dollar Liquidity Settlement. Traders should note the immediate effects on transaction costs, potential short‑term ETH supply dynamics, and broader implications for DeFi and stablecoin issuance.

Neutral

The Fusaka upgrade materially lowers transaction costs and increases throughput, which is fundamentally positive for Ethereum’s utility and competitiveness versus chains like Solana — a bullish structural development. However, the immediate reduction in EIP‑1559 burn rates introduces short‑term inflationary pressure on ETH supply and has coincided with low market sentiment (Extreme Fear, index ~21) and price pressure around the $3,000 support. For traders this creates mixed signals: lower fees should boost on‑chain activity and long‑term demand (bullish), but reduced burns and potential short‑term selling or profit‑taking can weigh on price (bearish). Historically, protocol upgrades that improve scalability (e.g., past hard forks or rollup adoptions) increase long‑term network value but can cause transient volatility around activation. Short term: expect increased on‑chain volume, lower fees, and potential downward price pressure from changed burn dynamics and profit‑taking. Long term: higher throughput and lower costs should attract more DeFi, stablecoin and institutional use, supporting ETH demand. Overall impact is neutral-to-slightly-bullish structurally but with near‑term volatility risk.