Short seller Culper Research is betting against ether (ETH) and ETH-linked stocks such as BitMine (BMNR), arguing that the network’s economics deteriorated following Ethereum’s latest network upgrade.

The firm said in a Thursday report that the December 2025 upgrade dubbed Fusaka flooded the network with excess blockspace and has "impaired ETH tokenomics." That drove transaction fees sharply lower. Because validators earn part of their income from those fees, the drop has reduced staking yields.

That dynamic could create a negative feedback loop, the report said, where declining validator yields reduce staking demand and network security.

The report also highlighted that Ethereum co-founder Vitalik Buterin sold nearly 20,000 ETH, worth around $40 million at current prices, this year, citing data from blockchain sleuth Lookonchain.

"Vitalik is selling, while bulls like Tom Lee are clueless as to ETH’s new reality," the report said. "We’re with Vitalik."

The report pushes back on bullish claims from Lee, chairman of Ethereum-centric treasury firm BitMine, who has pointed to rising transaction counts and active addresses as evidence of stronger network fundamentals.

Culper said those metrics are misleading. Its analysis claimed a significant share of the activity surge stems from address poisoning attacks, a scam tactic where attackers send small transactions to trick users into copying malicious wallet addresses. Culper estimated Ethereum fees have dropped roughly 90% since the upgrade.

"By Lee’s own logic, if utility is NOT going up, then ETH is in a death spiral," the report said. "This is exactly what we believe is happening."

The short thesis also targeted BitMine (BMNR), one of the largest corporate buyers of ether.

Since July, the company has accumulated roughly 4.4 million ETH as part of its treasury strategy. With ether prices down significantly from recent highs, those holdings are estimated to be 45% underwater, with BitMine sitting on roughly $7.4 billion in unrealized losses, DropsTab data shows.

BitMine did not return a request for comment by press time.

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