Over the past two years, Ethereum has struggled amid market volatility and technical bottlenecks: the price halved from a peak of $4,870 in 2023 to the $1,300 range in April 2025, frequently mocked by retail investors as a 'bear machine'—due to multiple failed rebound attempts becoming a profit haven for shorts. More critically, its exchange rate against Bitcoin continued to weaken, with the ETH/BTC trading pair dropping from 0.08 to 0.017, leading the market to question 'has Ethereum lost its narrative advantage?'. Institutional capital also voted with their feet: Grayscale's Ethereum Trust (ETHE) saw outflows exceeding $4.7 billion, while public chains like Solana and Avalanche diverted DeFi users with lower costs, peaking ecological anxiety.

I. Upgrade: Paradigm shift in technical architecture

The Pectra upgrade reshapes the underlying logic of Ethereum through three core breakthroughs:

1. Restructuring of the staking mechanism: EIP-7251 increased the single-node staking limit from 32 ETH to 2048 ETH, reducing the number of validators by 12% but improving management efficiency and lowering network bandwidth demand. Combined with EIP-7002's execution layer withdrawal function, users can control delegated staking withdrawals autonomously without relying on validator keys, significantly increasing staking participation rate; within 72 hours post-upgrade, the annualized deflation rate of ETH reached -6.8%.

2. Layer 2 scalability revolution: EIP-7691 increased the block blob capacity from 6 to 9, reducing Rollup transaction costs from $0.01 to $0.005, theoretically doubling TPS (e.g., Arbitrum from 100 to 200). EIP-7742 supports dynamic adjustment of blob capacity, laying the groundwork for future Fusaka upgrades introducing PeerDAS mechanisms.

3. Account abstraction realized: EIP-7702 allows regular wallets to temporarily possess smart contract functions, supporting batch transactions, gas fee payments (like USDC payments), and social recovery, reducing gas costs in DeFi lending scenarios by 62%. New users can even register via phone number and complete their first transaction without needing to hold ETH in advance.

II. News front: Market sentiment and capital resonance

1. Technical breakthroughs exceed expectations: The Pectra upgrade is seen as a key step for Ethereum towards a 'trillion-dollar security plan', particularly with the optimization of the staking mechanism and the realization of account abstraction, directly boosting market confidence. Within three days post-upgrade, the ETH price soared from $1,812 to $2,584, a rise of 42.6%, marking the best three-day performance since 2019.

2. Resonance of the macro environment and market sentiment: Bitcoin broke through $110,000 on May 22, setting a new historical high, boosting risk appetite in the cryptocurrency market. U.S. stocks rebounded from April lows as global trade tensions eased, with funds accelerating into risk assets.

3. Short squeeze effect in the futures market: Within three days post-upgrade, Ethereum futures short liquidation reached $438 million, far exceeding the long's $210 million, creating a positive feedback loop of 'price increase - short covering - further rise'. Institutional investor positions increased by 18% within three days post-upgrade, with traditional financial institutions like BlackRock beginning to test large staking strategies of 2048 ETH.

III. Technical analysis: Support from capital and on-chain data

1. Price and capital flow: The total value of ETH open interest has significantly increased, and the perpetual futures weekly financing rate has risen, showing strong confidence among long traders. On-chain data shows that whale addresses (holding over 10,000 ETH) increased their holdings by 127,000 ETH within 48 hours post-upgrade, with entry costs concentrated in the $2,300-$2,500 range.

2. Strengthening technical indicators: A bullish engulfing pattern formed on the weekly level, with RSI rising from 58 to 69, approaching the overbought area but still having upward space. After breaking the key resistance of $2,200 on the daily level, short-term support has moved up to $2,300, with good volume-price coordination.

3. Layer 2 ecosystem explosion: Rollup solutions like Base chain surpassed one million daily active users, and the demand for staking native tokens indirectly pushed up institutional holdings of ETH. The establishment of cross-Rollup communication standards (RCS) will enable instant asset transfers and lay the foundation for a unified order book for decentralized exchanges.

From 'doubt' to 'comeback', the Pectra upgrade is rewriting Ethereum's narrative logic. Whether the subsequent market can sustain depends on the speed of Layer 2 implementation and the continuity of institutional staking scale. Follow me for more in-depth analysis of cryptocurrencies; share your views on Ethereum's future in the comments; forward this article to let more people see how this 'technological revolution' is reversing market dynamics!