This article is from: Culper Research
Compiled by Odaily Odaily( @OdailyChina ); Translated by Azuma ( @azuma_eth )
Editor's Note: On March 6th, Wall Street short firm Culper Research suddenly announced that it was short Ethereum (ETH) and related securities such as BMNR. Culper Research's logic is that Vitalik and other developers miscalculated Ethereum's demand elasticity before the Fusaka upgrade, causing the upgrade to destroy ETH's token economic model. Culper Research also mentioned that Vitalik was fully aware of this and was actively taking steps to advance the price, while the stubborn Tom Lee is heading towards a dead end.
Neither Vitalik nor Tom Lee have responded to the institution's massive short- short. However, Vitalik's father, Dmitry Buterin (dima.eth), responded, saying, "When you see the statement 'Vitalik knows this and is selling,' you don't need to read any further. They are attention-seeking clowns, not researchers."
The following is the original text from Culper Research, translated by Odaily. Translating this article does not imply our agreement with Culper Research's views; it is merely to present a perspective from some Wall Street institutions on ETH and their attempts to manipulate the market.
According to the latest disclosure, we are short ETH and ETH-related stocks, including Bitmine (BMNR).
We believe that ETH's token economics model has been disrupted following the Fusaka upgrade in December 2025. Vitalik is well aware of this and is selling off; while Tom Lee, ETH's most ardent bull, continues to inject ineffective capital. ETH will continue to fall.
Tom Lee's Bitmine has consistently defended ETH, claiming that "ETH is not in a death spiral due to increasing utility." He cites the surge in active Ethereum addresses and transaction volume after the Fusaka upgrade as evidence of so-called "fundamental improvements" and institutional adoption, but he is completely wrong.
According to Tom Lee's own logic, if Ethereum's on-chain activity does not reflect real usage growth and fundamental improvements, then ETH is indeed in a death spiral.
And our research shows that this is exactly what is happening.
We conducted a comprehensive analysis of on-chain data from January 2025 to February 2026, and the results show that Lee's claim of "institutional adoption driving Ethereum activity growth" can actually be explained by a large amount of low-value address poisoning and wallet dusting. These behaviors are caused by the excess block space following the Fusaka upgrade.
After the Fusaka upgrade:
- 95% of new wallet growth comes from newly created dust addresses;
- The number of poison attacks has increased more than threefold;
- The poisoning incident explains over 50% of the growth in Ethereum transactions;
- Currently, poisoning transactions account for 22.5% of all Ethereum transactions;
The Fusaka upgrade increased the gas limit from 45M to 60M, aiming to expand the capacity of Ethereum Layer 1. Vitalik and the protocol team had previously expected gas fees to decrease by 10%–30%, but in reality, gas fees decreased by approximately 90%.
Vitalik and validators made a serious miscalculation in their calculation of Layer 1 demand elasticity. They used outdated mathematical models (based on assumptions prior to EIP-1559 and the advent of Layer 2), thus overestimating Layer 1 demand by 3 to 9 times. This is why we believe Vitalik is selling off large amounts of ETH. On January 30th, Vitalik announced in advance that he would sell 16,384 ETH to fund the Ethereum Foundation's "austerity period," but since then he has sold over 19,300 ETH and continues to sell.
Vitalik understood one thing that Tom Lee didn't—ETH's token economic model had been broken.
We personally documented an Ethereum network address poisoning attack. We created two new addresses and transferred funds between them. Within 5 minutes, we were attacked. We encourage readers to verify this phenomenon themselves. Currently, the rate of loss due to poisoning attacks is more than 8 times higher than before the Fusaka upgrade.
Furthermore, the gas limit increase has also hit Ethereum's validators, whose fee income per unit of gas has now dropped by 40%–50%. Lower yields will weaken staking demand and high-value transaction activity, further hindering institutional adoption. This flywheel has now started to reverse.
Meanwhile, Ethereum continues to lose market share, which flows to Solana and its own Layer 2 network.
- The number of Solana developers grew by 29% in 2025;
- Ethereum developer growth was only 6%;
- Talent is leaving the Ethereum ecosystem;
- Visa and Citigroup, among other institutions, have chosen Solana for their DeFi applications;
- Solana DEX's trading volume has exceeded twice that of Ethereum.
During the dot-com bubble, Netscape and Nokia dominated the market for over a decade, but ultimately, it was Google and Apple that truly reaped the rewards. We believe Ethereum is in a similar situation—we believe Ethereum's token economic model has collapsed, Tom Lee is trapped in his own position, and the price of ETH will continue to fall.
