This article is from:Culper Research

Compiled by｜Odaily Planet Daily (@OdailyChina); Translator｜Azuma (@azuma_eth)

Editor's note: On March 6, Wall Street short-selling agency Culper Research suddenly published a statement announcing that it is shorting ETH and related securities such as BMNR. Culper Research's logic is that developers like Vitalik miscalculated the demand elasticity of Ethereum before the Fusaka upgrade, leading to the upgrade destroying ETH's token economic model. Culper Research also mentioned that Vitalik is well aware of this and is taking action to get ahead, while the obstinate Tom Lee is heading toward a dead end.

In response to the agency's significant shorting, neither Vitalik nor Tom Lee has spoken up, but Vitalik's father, Dmitry Buterin (dima.eth), responded by saying, "Once you see the line 'Vitalik knows this and is selling,' you don’t need to read further. They are attention-seeking clowns, not researchers."

The following is the original content of Culper Research, translated by Odaily Planet Daily. The translation of this article does not imply that we agree with Culper Research's views, but is intended to present a portion of the perspectives from Wall Street institutions regarding ETH and to incite market sentiment.

Latest disclosure, we are shorting ETH and ETH-related stocks, including Bitmine (BMNR).

We believe that after the Fusaka upgrade in December 2025, ETH's token economic model has been destroyed. Vitalik knows this and is selling; meanwhile, ETH's most ardent bull, Tom Lee, continues to make ineffective investments. ETH will continue to decline.

Tom Lee's Bitmine has always defended ETH, claiming that "due to the rise in usability, ETH has not fallen into a death spiral." He cited the surge in Ethereum's active address numbers and transaction counts after the Fusaka upgrade as evidence of so-called "fundamental improvement" and institutional adoption, but he is completely mistaken.

According to Tom Lee's own logic, if the on-chain activity of Ethereum does not reflect real usage growth and fundamental improvement, then ETH is indeed in a death spiral.

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 indicate that the "institutional adoption led to activity growth in Ethereum" that Lee mentioned can actually be explained by a large number of address poisoning and wallet dusting behaviors. These behaviors are driven by the excess block space after the Fusaka upgrade.

After the Fusaka upgrade:

• 95% of new wallet growth came from newly created dust addresses;
• The number of poisoning attacks increased more than threefold;
• Poisoning activities accounted for over 50% of the increase in Ethereum transactions;
• Currently, poisoning transactions account for 22.5% of all Ethereum transactions;

The Fusaka upgrade raised the gas limit from 45M to 60M, aimed at expanding Ethereum Layer1's capacity. Vitalik and the protocol team previously expected gas fees to drop by 10%-30%, but the reality is that gas fees have dropped by about 90%.

Vitalik and the validators significantly miscalculated the demand elasticity of Layer1. They used outdated mathematical models (based on assumptions before EIP-1559 and before Layer2's emergence), thus overestimating Layer1's demand by 3 to 9 times. This is also why we believe Vitalik is selling a large amount of ETH. On January 30, 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 understands what Tom Lee does not — the token economic model of ETH has been destroyed.

We personally documented the address poisoning situation in the Ethereum network. We created two new addresses and made transfers between them. Within 5 minutes, we were subjected to an address poisoning attack. We encourage readers to verify this phenomenon themselves. Currently, the rate of loss due to poisoning attacks has increased by over 8 times compared to before the Fusaka upgrade.

In addition, the increase in gas limit has also impacted the Ethereum validators community, as validators' tip income per unit of gas has decreased by 40%-50%. The decline in yields will weaken staking demand and high-value transaction activity, further undermining institutional adoption. This flywheel has now begun to operate in reverse.

Meanwhile, Ethereum continues to lose market share, flowing towards Solana and its own Layer2 network.

• The number of Solana developers increased by 29% in 2025;
• The number of Ethereum developers grew only by 6%;
• Talent is leaving the Ethereum ecosystem;
• Institutions like Visa and Citigroup have chosen Solana for DeFi applications;
• The trading volume of Solana DEX has exceeded that of Ethereum by more than 2 times.

In the era of the internet bubble, Netscape and Nokia dominated the market for over 10 years, but in the end, it was Google and Apple that truly reaped the benefits. We believe that Ethereum's situation is similar — we think that ETH's token economic model has collapsed, Tom Lee is stuck in his own position, and the price of ETH will continue to decline.

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