Culper Research exposes “impaired” tokenomics of Ethereum (ETH), the second-largest crypto, through a report released on March 5, 2026. The firm calls out bullish ETH holders like BitMine for watching on as prominent members of the network, including co-founder Vitalik Buterin, are choosing to liquidate.
The report disclosed short positions in ether and ETH-linked stocks, including BitMine, backed by inconsistencies observed after the December 2025 Fusaka upgrade, leaving the ETH market bearish.
Culper Discloses Short Positions in ETH
In a thesis released on Thursday, short-selling firm Culper Research bets against ether (ETH-USD) and ETH-linked companies such as BitMine Immersion Technologies (BMNR), stating that ETH is all set to head into a death spiral. The firm highlights the Ethereum network’s latest Fusaka upgrade as its primary catalyst.
Culper argues that ETH tokenomics have deteriorated ever since the upgrade. The firm also exposed bullish investors like BitMine, one of the largest corporate holders of ETH, with BMNR stock slipping 3.65% at market close. BitMine shares are currently at $20.35, while ETH trades at $2,075.63, experiencing a 2.5% decline over the past 24 hours. The Ethereum market is reeling in Extreme Fear, with the Fear & Greed Index at a chilling 22, as market sentiment remains bearish.
CulperResearch calls out Ethereum co-founder Vitalik Buterin on X on Thursday, stating ETH’s current declining momentum, and that “Vitalik knows it and is selling.” Through the report, also released on Thursday, Culper announced which side it chose in the broader uncertain crypto market, claiming that “We’re with Vitalik.”
Fusaka Upgrade & Vitalik’s Sell-Off Raise Uncertainty
Culper’s report observed that weakened ETH tokenomics was a result of the excess blockspace that occurred after the December 2025 Fusaka upgrade. As blockspaces are filled with low-value spam transactions, legitimate transactions may no longer need to offer competitive tips to validators, thus impairing validator economics and weakening network security.
This is a reflexive loop long-warned by analysts, where an inflated blockspace with waning security protocols becomes highly vulnerable to malicious attacks, which can ultimately erode the very foundation of its security model.
The report casts doubt on Vitalik’s leadership, highlighting that the Ethereum co-founder has sold nearly 20,000 ETH this year, more than what was pre-announced: “Vitalik is selling, while bulls like Tom Lee are clueless as to ETH’s new reality.”
On-Chain Analysis of BitMine’s Claims Proves Bearish
BitMine, led by Chairman Tom Lee, is one of the largest corporate buyers of Ether. On March 5, 2026, BitMine reposted a tweet by Jack Adams, saying that the token “has NEVER broken its monthly bullish trend since birth of the asset,” supported by a snapshot of its bullish price chart from TradingView.
Lee has remained a loyal bull to the ETH network, attempting to dispel macro uncertainty by relying on an increase in transaction counts and active addresses as proof of the network’s strength.
However, Culper calls out these claims by using a comprehensive on-chain analysis of every single transaction from January 2025 through February 2026 to conclude that address poisoning, a cryptocurrency scam that uses fraudulent wallet addresses to trick users into sending funds, has been the key catalyst for a significant share of this activity.
Their analysis observes that “95% of the growth in new wallets can be attributed to address poisoning/dust senders,” with address poisoning being “responsible for over 50% of the growth in ETH transactions.”
Today, BitMine holds 4.4 million ETH as part of its treasury strategy. However, the Culper report indicates that these holdings are currently 45% underwater, with BitMine holding on to approximately $7.4 billion in unrealized losses. The firm comments that “By Lee’s own logic, if utility is NOT going up, then ETH is in a death spiral. This is exactly what we believe is happening.”
Is an ETH Death Spiral Imminent?
The conflict between Culper Research and BitMine highlights a growing divide between on-chain metrics and on-chain reality. If the reflexive feedback loop continues, lower security could lead to a loss of institutional support, further dropping the price of ETH.
If Vitalik Buterin’s liquidations are truly an admission of a fundamental flaw in the Fusaka upgrade, Ethereum faces its most significant crisis yet, thereby solidifying the arrival of a death spiral.
