In my opinion the blocksize can be increased over time, but by a small factor each time. And it should only increase if blocks are constantly full. We already had a blocksize increase with segwit and it was fine for the network.
Discussion
what if the main issue is how utxo sets are handled rather than the size of the block?
There is a limit on the optimizations that can be made until we hit the limit wall again in the future. If you want to be completely sovereign, you must be able to own an utxo and move it onchain at some point, all other options requires permission, or break under onchain high fees.