Culper Research: Why We Are Firmly Committed to Shorting ETH

Author: Culper Research (@CulperResearch)

Translation: Deep Tide TechFlow

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Deep Tide Introduction: Culper Research is a well-known short-selling firm on Wall Street that has accurately targeted several high-profile companies. This report directly addresses the core issue of Ethereum: the Fusaka upgrade in December 2025 brought a large amount of cheap block space, but genuine organic demand has not kept pace—the so-called “prosperity” data on-chain is actually fabricated through address poisoning attacks. Vitalik himself has been selling off ETH in large quantities, while Ethereum’s most steadfast bull advocate, Tom Lee, continues to defend it with flawed data. This article is not a prediction but a data-backed, verified short thesis worth every ETH holder reading carefully.

We are short on Ethereum and ETH-linked securities, including BMNR.

We believe the December 2025 Fusaka upgrade has severely damaged Ethereum’s tokenomics. Vitalik is aware of this and continues to sell; meanwhile, ETH’s most committed bull, Tom Lee, is pouring good money into a bad bet.

$ETH will continue to decline.

Tom Lee’s Defense: Active Addresses and Transaction Volume Are Rising

Tom Lee’s $BMNR defends ETH, claiming “ETH is not entering a death spiral because its utility is increasing.” He cites the surge in active addresses and transaction volume after Fusaka as evidence of “fundamentals strengthening” and institutional adoption.

Lee’s logic is flawed.

According to his own logic, if ETH’s on-chain activity does not reflect real growth in utility, then ETH is heading toward a death spiral.

Our research shows that this is precisely what is happening.

Full report and disclosures are now available at culperresearch.com.

The Truth About On-Chain Data: 95% of New Wallets Are Poisoned Attacks

Our comprehensive analysis of on-chain data from January 2025 to February 2026 shows that the “institutional adoption” figures cited by Tom Lee are actually explained by large-scale address poisoning/wallet dusting attacks caused by the excess block space from Fusaka.

Specific data after Fusaka:

• 95% of new wallets are explained by newly created “poisoned” wallets
• Address poisoning attacks increased more than threefold
• Poisoning attacks account for over 50% of ETH transaction volume growth
• Poisoning attacks now make up 22.5% of all ETH transactions

Fusaka Upgrade: Gas Fees Collapsed by 90%, Worse Than Expected by 3-9 Times

Fusaka increased the gas cap from 45 million to 60 million to expand Ethereum L1. Vitalik and PTG estimated gas fees would drop by 10-30%.

The reality: gas fees have fallen by about 90%.

Vitalik and validators severely underestimated L1 demand elasticity, with errors of 3-9 times—using outdated math models from before EIP-1559 and L2 emergence.

Vitalik Is Selling Frenziedly

This is why we believe Vitalik is massively selling ETH. On January 30, he announced plans to sell 16,384 ETH to fund Ethereum Foundation’s “contraction phase.” Since then, he has sold over 19,300 ETH and continues to sell.

He knows what Tom Lee does not: the tokenomics of ETH have already collapsed.

We personally verified address poisoning attacks

We documented the address poisoning process firsthand: we created two new wallets, transferred between them, and within five minutes, they were targeted by poisoning attacks.

We encourage readers to verify for themselves.

Losses from poisoning attacks are growing at more than eight times the rate before Fusaka.

Validator’s Flywheel Is Reversing

Moreover, the increased gas cap has severely hurt ETH validators, whose tips per gas unit have dropped by 40-50%. Lower earnings reduce staking demand and high-value activities, further weakening institutional adoption foundations.

The flywheel is now reversing.

Ethereum Is Losing to Solana and Its Own L2

Meanwhile, ETH continues to cede market share:

• Solana developer growth in 2025: +29%, Ethereum only +6%; talent is fleeing
• Visa and Citigroup are choosing Solana to build DeFi applications
• Solana DEX trading volume is now more than twice that of Ethereum

Conclusion: The Next Nokia

During the dot-com bubble, Netscape and Nokia dominated the market for over a decade, only to be overtaken by Google and Apple.

We view ETH with the same perspective.

We believe the tokenomics have already collapsed, Tom Lee is in a difficult position, and $ETH will continue to decline.