Culper Research disclosed a low position in ether and ETH-linked securities on Thursday, arguing that Ethereum’s post-modernization economics have deteriorated enough to put sustained downward pressure on the token. The company pointed directly to Fusaka’s December 2025 Ethereum upgrade and the recent sale of Vitalik Buterin as evidence that “ETH is falling.”

“NEW: We are short ETH ETH and ETH-related securities including BMNR,” Culper he wrote on X. “We believe ETH tokenomics have deteriorated following Fusaka’s December 2025 update. Vitalik knows this and is selling while ETH’s most ardent bull, Tom Lee, is throwing good money after bad.”

Why Culper Shortens Ethereum

Culper’s main claim is that L1 scaling changes in Fusaka have changed Ethereum’s demand charge dynamics more dramatically than expected. The company pointed to a “45 million to 60 million” gas limit boost that it said was intended to scale Ethereum’s base layer, along with estimates that “Vitalik and PTG” fees will drop from 10% to 30%. Culper says the realized result was much more sedate: “In fact, gas fees dropped by ~90%,” he wrote, adding that Ethereum management and validators “miscalculated the L1 demand elasticity by a factor of 3-9 based on outdated math (pre-EIP-1559 and pre-L2).”

This fee compression matters, Culper argues, because it affects the validator’s economics and staking incentives. “Furthermore, the increase in gas caps has killed $ETH validators, who are currently seeing 40-50% lower gas tips,” Culper wrote, arguing that lower yields reduce demand for staking and “high-value activity,” undermining the narrative of institutional adoption. “The flywheel is now turning in the opposite direction.”

The thread presents Tom Lee and BMNR as a prominent counterweight in the ETH bull camp, and then tries to dismantle his reading after the update. Culper said Lee defended ether by claiming, “ETH is not in a death spiral because utility is increasing.” According to Culper, Lee cited post-Fusaka spikes in vigorous addresses and transaction volume as evidence of “strengthening fundamentals” and institutional adoption.

Culper’s rebuttal is blunt and largely definitional: “By Lee’s logic, if ETH activity does NOT reflect increased utility and strengthening fundamentals, then $ETH will enter a death spiral,” it wrote. “Our research shows that this is exactly what is happening.”

To explain the boost in activity, Culper said an analysis of on-chain data from January 2025 to February 2026 suggests that much of the boost was not due to organic usage, but to a wave of low-value address poisoning and wallet clutter made possible by cheaper blockchain space. “After Fusaka: 95% of the increase in new wallets can be explained by newly created hoover wallets,” Culper wrote, adding that poisoning attacks have increased “over 3x,” that poisoning explains “>50% of the increase in USD transactions,” and that it now accounts for “22.5% of all ETH transactions.”

Culper stated that he confirmed this phenomenon first-hand, claiming that he created two modern wallets that were transferred between them and became the target of poisoning attacks “within 5 minutes”, while asserting that poisoning losses “are already >8 times higher than before Fusaka”.

Vitalik sells

The company also tried to tie its tokenomics thesis to Buterin’s recent sales activity, portraying it as conscious selling rather than routine financial management.

“We believe this is why Vitalik is selling ETH for a fist. On January 30, Vitalik previously announced that he would sell 16,384 ETH to finance the Foundation’s ‘austerity period.’ He has since sold over 19,300 ETH and counting,” Culper wrote. “He knows what Tom Lee doesn’t: ETH tokenomics is broken.”

Culper closed things out by expanding the bear case to a competitive story, claiming Ether was losing share to Solana and Ethereum’s own L2s, and comparing ETH’s current position to incumbents who led the early era before being forced out.

At the time of publication, the price of ETH was $2,080.

Featured image created with DALL.E, chart from TradingView.com