Culper Research shorted ETH, BitMine: Ethereum has entered a death spiral, Fusaka upgrade fee collapsed by 90%

Culper Research, a bearish institution, publicly discloses short positions on Ethereum (ETH) and BitMine (BMNR), accusing the Ethereum Fusaka upgrade of causing transaction fees to plummet over 90% and severely damaging the tokenomics. The firm bluntly states, “Vitalik is selling, while optimists like Tom Lee remain oblivious,” warning that the risk of a death spiral is increasing.
(Background: BitMine invests another $199 million to buy the dip on Ethereum! But smart money is all shorting ETH.)
(Additional context: Ethereum has approved the Fusaka upgrade, which includes 13 proposals such as EIP-7594, increasing the block size limit to 16MB.)

After the Fusaka upgrade, Ethereum faces pressure that goes beyond price issues, extending into fundamental questions about its long-term economic model. On March 5, Culper Research disclosed its short positions on ETH and BitMine stock (ticker BMNR), with a straightforward conclusion: “We are bearish, and we have data to support it.”

Culper’s core argument centers on the Fusaka upgrade launched on the mainnet last December. Although intended to expand Ethereum’s processing capacity, it unexpectedly caused transaction fees to become oversaturated, collapsing by about 90%. This has a direct and profound impact on the validator ecosystem, which relies on fee revenue to sustain operations.

The Logic of the “Death Spiral”: The Problem Lies in Incentive Structures

Understanding Ethereum’s “death spiral” hinges on its staking incentive mechanism. Validator rewards consist of two parts—fixed block rewards and a variable share of transaction fees. When fees shrink significantly, total rewards become insufficient to attract new stakers or even cause current validators to withdraw.

Culper fears this negative feedback loop: declining staking ratio → fewer network nodes → reduced security margin. In other words, the Fusaka upgrade brought “more capacity” but at the potential cost of “insufficient incentives.”

Notably, Culper cites data from on-chain tracking platform Lookonchain, indicating that Ethereum co-founder Vitalik Buterin recently sold about 20,000 ETH, worth roughly $40 million at current prices. Culper interprets this as a silent vote of no confidence from the founder: “Vitalik is selling, while bullish figures like Tom Lee remain unaware of ETH’s new reality. We side with Vitalik.”

The Data Debate: What Do Active Addresses Really Signify?

BitMine Chairman Tom Lee has been clear about his bullish stance on Ethereum, recently citing growth in trading volume and active addresses as signs of demand recovery. Culper challenges this view.

The report argues that the recent surge in active addresses is partly due to “address poisoning attacks”—a scam technique where attackers generate大量相似的钱包地址，混淆用户，留下大量无意义的链上互动记录。若将这些噪声剔除，所谓的用户活跃度复苏便值得怀疑。

Currently, BitMine holds about 4.4 million ETH, with unrealized losses on paper reaching approximately $7.4 billion, and an underwater position close to 45%.

Culper concludes with Tom Lee’s own logic:

If the increase in on-chain activity cannot correspond to real application demand, then according to your standards, ETH is falling into a death spiral—and that is precisely our judgment.