Ethereum Under Siege: Culper Research Shorts ETH, Citing Broken Tokenomics and Buterin's Sales
A prominent research firm, Culper Research, has recently revealed a significant short position in Ethereum (ETH) and its linked securities, arguing that the cryptocurrency's post-upgrade economics have severely deteriorated. The firm points to two critical factors: the impact of Ethereum's December 2025 FusaKa upgrade and recent sales by co-founder Vitalik Buterin, suggesting these signals indicate more sustained downward pressure on the token.
The FusaKa Fallout: Miscalculated Economics and Fee Compression
Culper's core contention is that the FusaKa upgrade's Layer 1 (L1) scaling changes dramatically altered Ethereum's demand-fee dynamic, far exceeding initial expectations. While the gas limit increase from 45 million to 60 million was intended to scale the base layer and was projected to reduce fees by 10-30%, Culper's research claims gas fees actually plummeted by approximately 90%. This stark discrepancy suggests that Ethereum's leadership and validators "miscalculated L1 demand elasticity by 3-9x," relying on outdated mathematical models that predated critical updates. This severe fee compression directly impacts validator economics and staking incentives, leading to what Culper describes as the "flywheel... now running in reverse."
Questionable Network Activity and Buterin's Bearish Moves
The firm also challenges the optimistic narratives surrounding increased network activity post-FusaKa, often cited by bullish analysts like Tom Lee. Culper's analysis of on-chain data from January 2025 through February 2026 suggests that a significant portion of new wallet growth (95%) is attributable to "dusting" – low-value address poisoning and wallet dusting attacks. These attacks, which have more than tripled and account for over 50% of ETH transaction growth (now comprising 22.5% of all transactions), create artificial activity spikes that mask genuine organic usage. Culper validated this by observing their own newly created wallets targeted by such attacks within minutes. Furthermore, Culper ties its bearish thesis to Vitalik Buterin's recent ETH sales, interpreting them as informed selling rather than routine treasury management. Despite Buterin's public announcement on January 30 of selling 16,384 ETH to fund the Ethereum Foundation's "austerity period," Culper reports that he has sold over 19,300 ETH and continues to divest. According to Culper, this indicates Buterin's awareness that "ETH tokenomics are broken," a fact they believe bullish proponents like Tom Lee fail to acknowledge. The firm concludes that Ethereum is losing market share to competitors like Solana and its own Layer 2 solutions, drawing parallels to early tech incumbents eventually displaced. At press time, Ethereum was trading at $2,080.
