Culper Research Shorts Ethereum, Claims Fusaka Upgrade Weakened ETH Tokenomics

Short-selling firm Culper Research has taken a bearish stance on Ethereum (ETH), betting against both the cryptocurrency and companies heavily exposed to it, including Ethereum-focused treasury firm BitMine (BMNR). The firm argues that Ethereum’s economic model has weakened significantly following the network’s December 2025 upgrade known as Fusaka.

In a report released Thursday, Culper Research claimed the Fusaka upgrade dramatically increased available blockspace on the Ethereum network. While the upgrade improved transaction capacity, the firm says it also flooded the network with excess supply, causing transaction fees to drop sharply. Lower fees directly impact validator earnings, since staking rewards partly rely on those fees. According to the report, this decline has already pushed Ethereum staking yields lower.

Culper warns this trend could trigger a negative feedback loop for the Ethereum ecosystem. If validator yields continue to decline, fewer participants may be incentivized to stake ETH, potentially weakening network security over time. The firm estimates Ethereum transaction fees have fallen roughly 90% since the Fusaka upgrade, which it says has significantly damaged ETH tokenomics.

The report also highlighted recent on-chain activity involving Ethereum co-founder Vitalik Buterin. Data cited from blockchain analytics platform Lookonchain suggests Buterin sold nearly 20,000 ETH this year, valued at roughly $40 million at current market prices. Culper used this data to argue that even key figures within the Ethereum community may be reducing their exposure.

Culper Research also challenged bullish narratives surrounding Ethereum’s network growth. Tom Lee, chairman of BitMine, has previously pointed to rising transaction counts and active addresses as indicators of stronger network fundamentals. However, Culper argues those metrics may be misleading.

According to the firm’s analysis, a large portion of the recent surge in Ethereum activity may stem from “address poisoning” attacks. In these scams, attackers send small transactions designed to trick users into copying malicious wallet addresses. Culper claims such activity artificially inflates transaction numbers and network usage metrics.

The report also criticized BitMine’s aggressive Ethereum treasury strategy. Since July, the company has accumulated roughly 4.4 million ETH. With Ethereum’s price declining from recent highs, Culper estimates the firm’s holdings are now about 45% underwater. Data from DropsTab suggests this represents approximately $7.4 billion in unrealized losses tied to the company’s ETH reserves.

BitMine had not responded to requests for comment at the time of publication.