Short seller Culper Research is betting against ether (ETH) and ETH-linked stocks such as BitMine (BMNR), arguing that the network’s finances worsened after Ethereum’s recent network upgrade.
The firm said in a Thursday report that the December 2025 upgrade, called Fusaka, flooded the network with excess blockspace and has “degraded ETH tokenomics.” That drove transaction fees down significantly. Because validators earn part of their income from these fees, the drop has reduced the stake yield.
This dynamic could create a negative feedback loop, the report said, where falling validator yield reduces stake demand and network security.
The report also highlighted that Ethereum co-founder Vitalik Buterin sold nearly 20,000 ETH, worth around $40 million at current prices, this year, citing data from blockchain speculator Lookonchain.
“Vitalik is selling while bulls like Tom Lee are ignorant of ETH’s new reality,” the report said. “We are with Vitalik.”
The report pushes back on bullish claims from Lee, chairman of Ethereum-centric financial firm BitMine, who has pointed to rising transaction numbers and active addresses as evidence of stronger network fundamentals.
Culper said those metrics are misleading. Its analysis claimed that a significant proportion of the increase in activity stems from address poisoning attacks, a scam tactic where attackers send small transactions to trick users into copying malicious wallet addresses. Culper estimated Ethereum fees have dropped about 90% since the upgrade.
“By Lee’s own logic, if utility does NOT increase, then ETH is in a death spiral,” the report states. “That’s exactly what we think is happening.”
The brief also targeted BitMine (BMNR), one of the largest corporate buyers of ether.
Since July, the company has accumulated about 4.4 million ETH as part of its financial strategy. With ether prices down significantly from recent highs, those holdings are estimated to be 45% underwater, with BitMine sitting on about $7.4 billion in unrealized losses, DropsTab data shows.
BitMine did not return a request for comment by press time.
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