Culper Research: Why We Are Firmly Committed to Shorting ETH

Data Falsification, Economic Collapse, Founders Fleeing—Ethereum’s Moat Is Being Filled by Its Own Hand.

Author: Culper Research (@CulperResearch)

Translation: Deep潮 TechFlow

Deep潮 Guide: Culper Research is a well-known Wall Street short-selling firm that has accurately targeted several major companies. This report directly addresses Ethereum’s core issues: the Fusaka upgrade in December 2025 brought a large amount of cheap block space, but real organic demand has not kept up—the so-called “prosperity” on-chain is actually fake, created by address poisoning attacks. Vitalik himself has been selling off ETH in large quantities, while Ethereum’s staunchest 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’s careful reading.

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

We believe the Fusaka upgrade in December 2025 has severely damaged Ethereum’s tokenomics. Vitalik knows this and is continuing to sell; meanwhile, ETH’s most steadfast 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 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 logic, if ETH’s on-chain activity does not reflect genuine growth in utility, then ETH is heading toward a death spiral.

Our research shows that this is exactly what is happening.

The full report and disclosures are now available at culperresearch.com.

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

Our comprehensive analysis of on-chain data from January 2025 to February 2026 shows: the “institutional adoption” data cited by Tom Lee is actually explained by a massive increase in low-value addresses caused by Fusaka’s excess block space—address poisoning and wallet dusting attacks.

Specific data after Fusaka:

• 95% of new wallets are explained by newly created “poisoned” wallets
• Address poisoning attacks increased over 3 times
• 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 period.” Since then, he has sold over 19,300 ETH and continues to sell.

He knows what Tom Lee doesn’t: the tokenomics of ETH has already collapsed.

We Have Verified Address Poisoning Attacks

We personally documented the address poisoning process: we created two new wallets, transferred between them, and within 5 minutes, they were targeted by poisoning attacks.

We encourage readers to verify for themselves.

Losses from poisoning attacks are growing at over 8 times the rate before Fusaka.

Validator Flywheel Is Reversing

Additionally, the increase in gas cap has dealt a heavy blow to ETH validators, whose tips per unit of gas have dropped by 40-50%. Lower rewards reduce staking demand and high-value activity, further weakening institutional adoption.

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 is 29%, while Ethereum’s is 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, but ultimately Google and Apple claimed the victory.

We view ETH with the same perspective.

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