Culper Research disclosed a short position in ether and ETH-linked securities Thursday, arguing that Ethereum’s economics after the Fusaka upgrade have deteriorated enough to exert sustained downside pressure on the token. The firm pointed to December 2025’s Fusaka upgrade and Vitalik Buterin’s recent sales as evidence that “ETH is going lower.”
“NEW: We are short Ether ETH, and ETH-linked securities, incl. BMNR,” Culper wrote on X. “We think ETH tokenomics are impaired following the December 2025 Fusaka upgrade. Vitalik knows it and is selling, while ETH’s most ardent bull, Tom Lee, is throwing good money after bad.”
Why Culper Is Shorting Ethereum
Culper’s central claim is that Fusaka’s L1 scaling changes altered Ethereum’s demand–fee dynamics far more than anticipated. The firm highlights a gas-limit increase from 45M to 60M intended to scale the base layer and says developers expected fees to fall only 10–30%. According to Culper, fees instead dropped roughly 90%, and Ethereum leadership and validators “miscalculated L1 demand elasticity by 3–9x based on outdated math (pre-EIP-1559 and pre-L2s).”
That compression matters because lower fees affect validator economics and staking incentives. “The gas-limit increase killed $ETH validators, who are now seeing 40–50% lower tips per gas,” Culper wrote, arguing reduced yields will cut demand for staking and high-value activity and undermine the institutional adoption narrative. “The flywheel is now running in reverse.”
Culper frames Tom Lee and BMNR as prominent ETH bulls and challenges their post-upgrade interpretation. Lee has argued that ETH isn’t in a death spiral because on-chain utility is rising, pointing to spikes in active addresses and transaction counts after Fusaka as signs of strengthening fundamentals and institutional adoption. Culper counters that, by Lee’s logic, if activity doesn’t reflect increasing utility, then ETH would be in a death spiral—and Culper’s research says that is precisely what’s happening.
Much of the post-Fusaka activity surge, Culper says, is not organic usage but low-value address poisoning and wallet dusting enabled by cheaper blockspace. Their analysis of on-chain data from January 2025 through February 2026 suggests 95% of new-wallet growth is explained by newly created “dusting” wallets; poisoning attacks have “more than 3x’ed,” account for “>50% of $ETH transaction growth,” and now represent “22.5% of all ETH transactions.” Culper says it validated the pattern by creating two new wallets, transferring between them, and being targeted by poisoning within five minutes. They claim poisoning losses are “already pacing >8x higher than pre-Fusaka.”
Vitalik Is Selling
Culper ties this tokenomics thesis to Buterin’s recent sales, portraying them as informed selling rather than routine treasury moves. “This is why, we think, Vitalik is selling ETH hand over fist. On January 30, Vitalik pre-announced he’d sell 16,384 ETH to fund the Foundation’s ‘austerity period.’ Since then, he’s sold over 19,300 ETH and counting,” Culper wrote. “He knows what Tom Lee doesn’t: ETH tokenomics are broken.”
Culper broadened the bear case to competition, saying ether is losing share to Solana and to Ethereum’s own L2s, likening ETH’s current position to past incumbents displaced after leading earlier eras.
At press time, ETH traded at $2,080.
ETH remains above the black trendline, 1-week chart | Source: ETHUSDT on TradingView.com
Featured image created with DALL·E, chart from TradingView.com
