Ethereum will undergo a series of major technical upgrades this year, which are highly anticipated long-term bullish factors in the market. However, the intimidating short-selling institution Culper Research believes that the Ethereum economic model is severely flawed, hiding a “death spiral” risk, and has released a report shorting Ether and Bitmine (BMNR).
This short attack by Culper Research has become the most discussed topic in the crypto community—whether it is a bearish stance or a misjudgment.
On Thursday, Culper Research published a short report revealing short positions in Ether and other Ethereum-related stocks like Bitmine. The firm pointed out that last December’s “Fusaka upgrade” led to an oversupply of block space and a sharp decline in transaction fees. Since some validator income comes from these fees, staking yields have also shrunk, severely damaging the Ethereum economic model.
Culper Research warns that such changes could create a “vicious cycle”: as validator rewards continue to decrease, market participation in staking will decline, jeopardizing the security of the Ethereum network.
The report further cites Lookonchain data indicating that Ethereum co-founder Vitalik Buterin has sold nearly 20,000 ETH this year, estimated at around $40 million at current prices. The report states:
Even Vitalik is offloading, while die-hard bulls like Tom Lee are still living in delusion, oblivious to the new reality facing Ether.
This time, we stand with Vitalik.
Earlier, Bitmine CEO Tom Lee emphasized that the number of Ethereum transactions and active addresses continues to rise, symbolizing strong fundamentals. However, Culper Research counters that these data are misleading, and much of the so-called “explosive activity” is actually due to “address poisoning attacks.”
According to Culper Research estimates, since the Fusaka upgrade, Ethereum transaction fees have dropped by about 90%. The report mentions:
Following Tom Lee’s logic, if Ethereum’s actual utility isn’t improving, it means Ether has fallen into a “death spiral.” We firmly believe this is the current scenario.
Additionally, this short report also targets one of the world’s largest Ethereum enterprise buyers, Bitmine.
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