Short seller Culper Research is betting against ether (ETH) and ETH-linked stocks like BitMine (BMNR), arguing that the network’s economics deteriorated following the latest Ethereum network upgrade.
The firm said in a report on Thursday that the December 2025 upgrade dubbed Fusaka flooded the network with excess block space and has “harmed ETH tokenomics.” That caused transaction fees to drop dramatically. Because validators make part of their revenue from those fees, the drop has reduced staking returns.
That dynamic could create a negative feedback loop, according to the report, where declining validator returns reduce staking demand and network security.
The report also highlighted that Ethereum co-founder Vitalik Buterin sold almost 20,000 ETH, worth around $40 million at current prices, this year, citing data from blockchain sleuth Lookonchain.
“Vitalik is selling, while bulls like Tom Lee have no idea about the new reality of ETH,” the report says. “We are with Vitalik.”
The report rejects bullish claims from Lee, president of Ethereum-focused treasury firm BitMine, who has pointed to rising transaction counts and active addresses as evidence of stronger network fundamentals.
Culper said those metrics are misleading. Their analysis claimed that a significant portion of the increase in activity is due to address poisoning attacks, a scam tactic in which attackers send small transactions to trick users into copying malicious wallet addresses. Culper estimated that Ethereum fees have fallen by approximately 90% since the upgrade.
“By Lee’s own logic, if utility does NOT increase, then ETH is in a death spiral,” the report said. “This is exactly what we think is happening.”
The short thesis also focused on BitMine (BMNR), one of the largest corporate buyers of ether.
Since July, the company has accumulated approximately 4.4 million ETH as part of its treasury strategy. With ether prices down significantly from recent highs, those holdings are estimated to be 45% underwater, with BitMine racking up roughly $7.4 billion in unrealized losses, DropsTab data shows.
BitMine did not respond to a request for comment at the time of this publication.
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