Short seller Culper Research is shorting ETH-related stocks such as Ethereum (ETH) and BitMine (BMNR), arguing that the economics of the Ethereum network have worsened following its latest network upgrade.
The December 2025 upgrade, known as Fusaka, flooded the network with excess block space and “hurt ETH token economics,” the company said in a report on Thursday. This resulted in a significant drop in transaction fees. Since validators earn part of their income from these fees, the drop in fees reduces staking yields.
This dynamic could create a negative feedback loop, with lower validator yields reducing staking demand and network security, the report said.
The report also cited data from blockchain sleuth Lookonchain to highlight that Ethereum co-founder Vitalik Buterin sold nearly 20,000 ETH this year, worth about $40 million at current prices.
“Vitalik is selling off, and bulls like Tom Lee are clueless about ETH’s new reality,” the report said. “We’re with Vitalik.”
The report counters optimistic claims by Lee, chairman of Ethereum-focused financial firm BitMine, who pointed to increases in transaction numbers and active addresses as evidence of stronger network fundamentals.
Culper said those metrics are misleading. Its analysis said a large part of the surge in activity stems from address poisoning attacks, a fraud tactic in which attackers send small transactions to trick users into copying malicious wallet addresses. Culper estimates that Ethereum fees have dropped by about 90% since the upgrade.
“By Lee’s own logic, if utility doesn’t rise, then ETH will be in a death spiral,” the report said. “This is exactly what we believe is happening.”
The brief paper also targets BitMine (BMNR), one of the largest corporate buyers of Ethereum.
Since July, the company has accumulated approximately 4.4 million ETH as part of its financial strategy. DropsTab data shows that as the price of ether has fallen sharply from recent highs, these holdings have shrunk by an estimated 45%, and BitMine has unrealized losses of approximately $7.4 billion.
BitMine had not responded to a request for comment as of press time.
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