Culper Research Takes Short Position on Ethereum; Buterin's Sales Signal Potential Further Decline

Culper Research has publicly declared a short position on Ether and related assets, citing deteriorating economic conditions following Ethereum's Fusaka upgrade in December 2025. The firm suggests that the recent selling actions by Ethereum co-founder Vitalik Buterin indicate more challenges ahead for the token.

Key Takeaways

Culper Research is short on Ether (ETH), believing the token's economics have worsened post-Fusaka upgrade.
They attribute significant fee reductions, about 90%, to changes made during the upgrade, leading to adverse effects on validating and staking incentives.
The firm also critiques Tom Lee's bullish stance on ETH, claiming recent wallet activity is largely driven by low-value "dusting" transactions.
Vitalik Buterin's selling activity is presented as a sign that he recognizes the deteriorating economic situation surrounding ETH.

Culper Shorts Ethereum, Says Buterin Selling Signals More Pain Ahead

Culper's Position on Ethereum

Culper Research announced their short position in Ethereum on Thursday, arguing that since the Fusaka upgrade in December 2025, the economic fundamentals supporting the token have weakened significantly. They highlighted recent selling activities by Vitalik Buterin as an indicator that "ETH is going lower."

“NEW: We hold a short position in Ether (ETH) and ETH-linked securities, including BMNR,” Culper stated on X. They believe that the tokenomics of Ethereum are impaired, asserting that Buterin's selling actions confirm these concerns, while they also pointed out that even staunch ETH supporter Tom Lee is investing recklessly.

Reasons Behind Culper's Shorting Strategy

Culper argues that the Fusaka upgrade’s adjustments to Ethereum’s Layer 1 (L1) scaling had a more drastic impact on the demand for gas fees than anticipated. They noted a planned increase in gas limits of “45 to 60M” aimed at scaling Ethereum’s core, along with predictions that Buterin and the community expected fee reductions of 10% to 30%. In reality, gas fees plummeted by approximately 90%, which they believe reflects serious miscalculations by Ethereum's leadership.

This drop in fees, according to Culper, negatively affects validator earnings and staking incentives, ultimately stifling demand for staking and institutional involvement in Ethereum. “The flywheel is now running in reverse,” they stated.

In their critique, Culper addressed Tom Lee's defense of Ethereum, where he claimed that heightened utility meant it wasn’t in a "death spiral." However, they countered by stating that if Ethereum’s activity isn't translating to increased utility, it indeed suggests another story: a decline.

To elaborate on the recent activity, Culper reviewed July 2025 to February 2026 on-chain data, revealing that a large portion of the increased wallet numbers resulted from low-quality transactions and manipulation rather than organic growth. They determined that 95% of new wallet creation was linked to "dusting" wallets, with such activities tripling post-upgrade and constituting over 22% of all ETH transaction volume.

Culper even highlights a anecdote where they created two new wallets, quickly becoming targets of poisoning attacks, suggesting that these losses are exponentially greater since Fusaka.

Vitalik's Selling Activity

Additionally, Culper connects Buterin's selling activity with their tokenomics concerns, framing it as a transition away from normal treasury actions.

“The main reason is that Vitalik is selling ETH aggressively. On January 30, he pre-announced his plan to sell 16,384 ETH to support the Foundation's budget constraints. He has since sold over 19,300 ETH and continues to do so,” Culper wrote. They argue that Buterin is aware of the looming issues impacting ETH tokenomics, unlike some of its proponents.

Culper concludes their analysis by discussing competition in the blockchain space, positing that Ethereum is ceding ground to rival blockchain networks like Solana and its own Layer 2 solutions. They liken the current situation with ETH's valuation to historical scenarios where leading technologies were eventually surpassed by newer entries.

As of the time of this writing, Ethereum is trading at $2,080.

Ethereum price chart
ETH remains above the black trendline, 1-week chart | Source: ETHUSDT on TradingView.com