Is This New Catalyst a New Reason to Buy Ethereum With $1,000?

Ethereum's (CRYPTO: ETH) latest renovation is the Fusaka upgrade, introduced earlier this week and aimed at cutting costs, among other things.

If you have $1,000 to allocate and you are wondering whether Fusaka is your cue to finally buy Ethereum (ETH), it's worth understanding this update's actual investment impact, so let's dig into how much it really changes the network.

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This is yet another step in the right direction

After a brutal few weeks for crypto, Ethereum's price is well below its all-time high. Sentiment is still fragile, so it's not too surprising that chatter about the rollout of Fusaka is not yet lighting up social media. Still, the muted tone of the anticipatory discussions is a sign that many investors simply don't see Fusaka as being earth shattering in terms of what it adds to Ethereum.

But under the hood, Fusaka is not trivial, as it bundles a dozen Ethereum Improvement Proposals (EIPs) focused on making it cheaper and easier for the chain's Layer-2 (L2) rollups to post their compressed transaction data back to the main chain. Together, these changes supposedly will cut rollup data costs by roughly 40% to 60%, depending on the particular L2 chain and its traffic conditions. While it's unclear precisely how much Fusaka will reduce gas fees for users on Ethereum's mainnet, the end results should be that people pay less gas on average and that fees will be less likely to surge to absurd heights when the network is under heavy load.

For regular users, one of the most visible pieces is the addition of verifying user sign-ins to crypto wallets using the same kind of signatures that your phone or laptop uses for face ID, touch ID, and similar biometric logins. Wallets should now be able to offer multifactor login flows that feel much closer to mainstream banking apps than previously.

Competitively, these upgrades are worthwhile because chains like Solana have long been dramatically undercutting Ethereum on transaction costs and transaction speed for years. If Fusaka succeeds, Ethereum will narrow that gap substantially while still preserving its somewhat more conservative design and its far richer decentralized finance (DeFi) ecosystem.

So this is not a cosmetic facelift, though there are some very appealing cosmetic elements included. The question investors need to ask is whether that is enough to change how they should allocate their capital.

Is Fusaka a good reason to invest $1,000?

One investment thesis for buying Ethereum is that if more economic activity settles on its base chain and its L2s, that activity pays fees in Ether, part of those fees are burned, and the token becomes a sort of toll asset on a scarce, globally relevant platform.

In practice, the rise of L2s has made that loop pretty messy, as value has not reliably accrued back to the mainnet as desired. Activity has consistently grown, but the mainnet's fee revenue and coin burning has declined after past upgrades, which hurt Ethereum's narrative as a cash-generating platform and also raised questions about the economic prospects of the chain's L2-centered strategy for scaling. Fusaka is explicitly trying to fix that by letting L2s scale and by recapturing more value for the base chain at the same time. If that works, it might mean that during the next few years, more coins will be burned as L2 throughput increases, without fees spiraling high enough to drive users away.

There is also a user growth story that might play out. Assuming developers lean into making passkey wallets and better mobile user experience as enabled by Fusaka, you could potentially see a world where new users onboard to an Ethereum L2 with a tap of face ID on their phones and then wander into using DeFi apps, games, or other applications, spreading their capital around all the while. But that assumes new users are going to be enticed to Ethereum mostly due to its convenience first rather than its ecosystem, which seems to be backward.

So is Fusaka, by itself, a reason to deploy $1,000 into Ethereum today? Probably not. It's an incremental catalyst that strengthens an existing thesis rather than creating a brand-new one or blowing open new opportunities.

In that vein, investors should probably treat the upgrade as a positive factor but not anything to pounce on immediately. But if Ethereum fits your risk tolerance and you're willing to hold it for a long time, it's still certainly worth owning.

Alex Carchidi has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.