On May 7, 2025, Ethereum completed the Pectra upgrade, bringing optimizations in account abstraction, Layer 2 scaling, and validator mechanisms, enhancing network efficiency and user experience. After the upgrade, the ETH price broke through $2200, showing a positive market reaction to technological advancements. However, Ethereum still faces challenges from the Layer 2 'parasitic' effect, competitive pressures, and centralization. In the future, Ethereum needs to find breakthroughs both technologically and in the market to achieve higher price targets and market positions.

More exciting than Ethereum's upgrade is its price breaking the $2200 mark, peaking at $2245, the highest point since early March, undoubtedly aided by Bitcoin's surge, which broke the $100,000 mark on May 9, reaching a maximum of $104,145. The impacts of Ethereum and Bitcoin also signify the return of a bull market, hoping that after Bitcoin breaks historical highs, altcoins will also experience a bullish trend!

Pectra Upgrade: Ethereum's 'Technical Magic'

The Pectra upgrade marks another milestone for Ethereum following the Dencun upgrade in 2024, integrating 11 Ethereum Improvement Proposals (EIPs) from Prague (execution layer) and Electra (consensus layer), targeting scalability, user experience, and network efficiency. Imagine this as upgrading the core chip of a precision instrument, optimizing the transmission system, and adding a user-friendly touch interface. Here are some core highlights showcasing how Ethereum elegantly pivots on the technical stage:

EIP-7251: Validator 'Slimming' and Efficiency Leap

Previously, the Ethereum network hosted over 1.07 million validator nodes, each staking 32 ETH, resembling a bustling digital city, albeit slightly lagging due to 'overcrowding'. EIP-7251 has increased the maximum staking balance per validator from 32 ETH to 2048 ETH, encouraging big players to consolidate nodes and reduce the total number of validators.

Highlight: Fewer nodes mean lower network load, and validator management is more efficient. Data from the X platform shows that after the upgrade, the network runs smoothly, and processing speed has significantly improved.

Deflation Returns: Burn Rate 'Ignites' ETH

Ethereum's inflation and deflation depend on the balance between newly issued ETH (validator rewards) and burned ETH (EIP-1559 mechanism). The Pectra upgrade decisively tilted this balance towards deflation.

Surge in Burn Rate: L2 scaling and account abstraction stimulated on-chain activity, leading to a surge in mainnet transaction volume. Observations from the X platform indicate that within hours of the upgrade, the ETH burn rate soared, with some users even reporting a short-term annual deflation rate of -6.8%. Although this extreme data may be driven by short-term enthusiasm, the fact that the daily burn volume has doubled is undeniable.

Reduced Issuance: EIP-7251 decreases the number of validators, curbing the production of new ETH. When the burn rate exceeds the issuance rate, the total supply of ETH begins to contract, and deflationary attributes reappear.

The 'Double-Edged Sword' of L2: An active L2 ecosystem (like Base and Arbitrum) has increased mainnet Gas consumption, but its independent economic model (revenue flowing to Coinbase or Arbitrum DAO) limits mainnet fee capture. DefiLlama data shows that Ethereum mainnet fees in the past 30 days were only $19 million, far lower than Tron ($51.8 million) and Solana ($39.4 million).

The return of deflation has given ETH holders hope, but its sustainability remains to be seen. If L2 activity slows or users shift to high-throughput chains like Solana, the burn rate may decline, and the deflationary effect could weaken.

Breakthrough of $2200: A 'Warm Breeze' of Market Sentiment

The ETH price broke through $2200 after the Pectra upgrade, with a daily increase of 7.42%, injecting a strong dose of confidence into the long-dormant market. However, this rally is driven not only by technology but also by the buoyancy of market sentiment.

Technical Benefits Released: The Pectra upgrade optimized user experience and L2 efficiency, attracting more on-chain activity. On the X platform, crypto enthusiasts are actively discussing reduced Blob fees and the convenience of account abstraction, believing these improvements will benefit ETH demand in the long term.

Short-term Speculative Frenzy: Futures premiums rose slightly from 3% to 4%, though still below the neutral threshold of 5%, indicating that leveraged bulls are tentatively increasing their positions. Optimism in the market regarding the upgrade has boosted trading volume and catalyzed the breakthrough.

The 'Warm Breeze' of Macroeconomic Background: Despite ongoing global trade disputes and risks of economic recession, the crypto market has recently shown signs of warming, with Bitcoin breaking $100,000 providing a 'tailwind' for ETH.

However, $2200 is just the starting point; for ETH to regain the March high (around $2400) or even challenge historical highs, it must face multiple challenges.

The 'New Starting Point' at $2200

The Ethereum Pectra upgrade acts like a catalyst, igniting ETH's deflationary attributes and driving the price to $2203.91. This is not only a recognition of technological progress but also injects a touch of warmth into a long-dormant market. However, the 'parasitic' effects of L2, competitive pressure from wolves circling, concerns about centralization, and narrative fog remain challenges on ETH's path to higher targets. The future of Ethereum depends on whether it can convert its technical advantages into market momentum and find its own 'North Star'—perhaps through ETF staking or the institutional wave of RWA.

As one X user stated: 'Pectra makes Ethereum smarter and faster, but the true price explosion requires a story and belief.' $2200 is just the starting point; Ethereum's narrative continues to unfold. Will this time allow opportunities to slip away again?

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