Short seller Culper Research is betting against ether (ETH) and ETH-related stocks such as BitMine (BMNR), arguing that the network’s economics have deteriorated following Ethereum’s latest network upgrade.
The company said in a report released Thursday that the December 2025 upgrade, dubbed Fusaka, flooded the network with excess block space and “impaired the tokenomics of ETH.” This caused transaction fees to drop significantly. Since validators earn part of their revenue from these fees, the drop has reduced staking returns.
According to the report, this dynamic could create a negative feedback loop, in which declining validator yields reduce staking demand and network security.
The report also highlights that Ethereum co-founder Vitalik Buterin sold nearly 20,000 ETH this year, worth around $40 million at current prices, citing data from blockchain detective Lookonchain.
“Vitalik is selling, while bulls like Tom Lee have no idea about ETH’s new reality,” the report said. “We are with Vitalik.”
The report pushes back against bullish claims from Lee, president of Ethereum-focused treasury firm BitMine, who pointed to increased transaction counts and active addresses as evidence of stronger network fundamentals.
Culper said those measurements were misleading. Its analysis claims that a significant portion of the increase in activity comes from address poisoning attacks, a scam tactic in which attackers send small transactions to trick users into copying malicious wallet addresses. Culper estimates that Ethereum fees have dropped about 90% since the upgrade.
“By Lee’s own logic, if utility is NOT increasing, then ETH is in a death spiral,” the report states. “This is exactly what we believe is happening.”
The short thesis also targeted BitMine (BMNR), one of the largest 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, these holdings are estimated to be 45% underwater, with BitMine sitting on approximately $7.4 billion in unrealized losses, according to DropsTab data.
BitMine did not return a request for comment at the time of publication.
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