Author: Trend Research
Since the market crash on October 11, the entire crypto market has been sluggish, with market makers and investors suffering heavy losses. The recovery of capital and sentiment will take time.
However, the crypto market is never short of new fluctuations and opportunities, and we remain optimistic about the future market.
This is because the trend of mainstream crypto assets integrating with traditional finance to form new business models has not changed; instead, it has been building a moat rapidly during this period of market downturn.
1. Wall Street Consensus Strengthens
On December 3, U.S. SEC Chairman Paul Atkins stated in an exclusive interview with FOX at the New York Stock Exchange: "In the coming years, the entire U.S. financial market may migrate onto the blockchain."
Atkins mentioned:
- The core advantage of tokenization is that if assets exist on the blockchain, the ownership structure and asset attributes will be highly transparent. Currently, publicly listed companies often do not know exactly who their shareholders are, where they are located, or where the shares are held.
- Tokenization also has the potential to achieve "T+0" settlement, replacing the current "T+1" trading settlement cycle. In principle, the delivery-versus-payment (DVP)/receive-versus-payment (RVP) mechanism on-chain can reduce market risks and enhance transparency. The time gap between clearing, settlement, and fund delivery is currently a source of systemic risk.
- He believes tokenization is an inevitable trend in financial services, and mainstream banks and brokerages are already moving toward tokenization. The world may not even need 10 years... perhaps it will become a reality in just a few years. We are embracing new technologies to ensure the U.S. remains at the forefront in areas like cryptocurrency.
In reality, Wall Street and Washington have already established a deep capital network for crypto, forming a new narrative chain: U.S. political and economic elites → U.S. bonds (Treasury bonds) → stablecoins / crypto treasury companies → Ethereum + RWA + L2
This chart shows the intricate connections between the Trump family, traditional bond market makers, the Treasury Department, tech companies, and crypto companies, with the green elliptical links forming the backbone:
(1) Stable Coin (USDT, USDC, dollar assets behind WLD, etc.)
The majority of reserve assets are short-term U.S. bonds + bank deposits, held through brokers like Cantor.
(2) U.S. Bonds (U.S. Treasuries)
Issued and managed by the Treasury / Bessent side.
Used by Palantir, Druckenmiller, Tiger Cubs, etc., as low-risk interest rate base holdings.
Also the yield assets pursued by stablecoins / treasury companies.
(3) RWA
From U.S. bonds, mortgages, accounts receivable to housing finance.
Tokenized through Ethereum L1 / L2 protocols.
(4) ETH & ETH L2 Equity
Ethereum is the main chain hosting RWA, stablecoins, DeFi, and AI-DeFi.
L2 equity / Token represents the right to claim future transaction volume and fee cash flows.
This chain expresses:
U.S. dollar credit → U.S. bonds → stablecoin reserves → various crypto treasury / RWA protocols → ultimately settled on ETH / L2.
In terms of RWA TVL, compared to other public chains affected by the October 11 decline, ETH is the only public chain that quickly recovered from the drop and rose. Its current TVL is $12.4 billion, accounting for 64.5% of the total crypto market.
2. Ethereum Explores Value Capture
The recent 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 EIPs like PeerDAS; it attempts to address the issue of insufficient value capture on the L1 mainnet caused by L2 development.
Through EIP-7918, ETH introduces a "dynamic floor price" for blob base fees, tying its lower limit to the L1 execution layer base fee, requiring blobs to pay DA fees at a unit price of at least approximately 1/16 of the L1 base fee. This means Rollups can no longer occupy blob bandwidth at near-zero cost in the long term; the corresponding fees will be burned and returned to ETH holders.
There have been three upgrades related to "burning" in Ethereum:
(1) London (single dimension): Only burned the execution layer; ETH began to experience structural burning due to L1 usage.
(2) Dencun (dual dimension + independent blob market): Burned execution layer + blob; L2 data written to blobs also burned ETH, but the blob portion was almost 0 during low demand.
(3) Fusaka (dual dimension + blob bound to L1): To use L2 (blob), one must pay at least a fixed proportion of the L1 base fee, which is burned. L2 activity is more stably mapped to ETH burning.
As of December 11, 23:00, the 1-hour blob fees have reached 569.63 billion times the pre-Fusaka upgrade level, burning 1,527 ETH in one day. Blob fees now account for the highest proportion of burning, up to 98%. As ETH L2 becomes more active, this upgrade is expected to bring ETH back into deflation.
3. Ethereum Technical Strength Improves
During the October 11 decline, ETH's futures leverage was thoroughly cleared, eventually affecting the spot leverage. At the same time, many with weak conviction in ETH led to numerous early OG investors reducing their holdings. According to Coinbase data, speculative leverage in the crypto space has dropped to a historically low region of 4%.
In the past, a significant portion of ETH short positions came from traditional Long BTC/Short ETH paired trades, which generally did very well during bear markets. However, this time something unexpected happened. The ETH/BTC ratio has maintained a sideways resistance trend since November.
ETH's current exchange balance is 13 million coins, about 10% of the total supply, which is at a historical low. As the Long BTC/Short ETH pairing has failed since November, during extreme market panic, a "short squeeze" opportunity may gradually emerge.
As we approach the turn of 2025–2026, both the U.S. and China have signaled friendly monetary and fiscal policies:
The U.S. is expected to pursue tax cuts, interest rate reductions, and relaxed crypto regulations, while China will adopt appropriate easing measures and financial stability (suppressing volatility).
Amid the relatively loose expectations from both the U.S. and China, and scenarios suppressing downward asset volatility, ETH remains in a favorable buying "sweet spot" during extreme panic, while capital and sentiment have not fully recovered.
