Wall Street Shorts ETH: Vitalik is Already Informed and Jumping Ahead, Tom Lee Still Clinging to His Misconceptions

Source: Culper Research

Translation: Azuma, Odaily Planet Daily

Editor’s Note: On March 6, the short-selling firm Culper Research suddenly released a statement announcing that they are shorting ETH and related securities such as BMNR. Culper Research’s logic is that developers like Vitalik made errors in calculating Ethereum’s demand elasticity before the Fusaka upgrade, which led to the upgrade damaging ETH’s token economic model. Culper Research also mentioned that Vitalik is well aware of this and is actively rushing to capitalize on it, while stubborn Tom Lee is heading for a dead end.

In response to this large-scale short position, Vitalik himself and Tom Lee have not yet issued statements, but Vitalik’s father Dmitry Buterin (dima.eth) responded, saying: “Once you see the phrase ‘Vitalik knows this and is selling,’ you can stop reading. They are clowns eager for attention, not researchers.”

Below is the original Culper Research article, translated by Odaily Planet Daily. Translating this does not mean we agree with Culper Research’s views; it is only to present some perspectives from Wall Street institutions regarding ETH and market speculation.

Latest disclosure: We are short ETH and stocks related to ETH, including Bitmine (BMNR).

We believe that after the Fusaka upgrade in December 2025, ETH’s token economic model has been compromised. Vitalik is aware of this and is selling; meanwhile, ETH’s most steadfast bull, Tom Lee, continues to add ineffective investments. ETH will continue to decline.

Tom Lee’s Bitmine has been defending ETH, claiming that “as utility improves, ETH is not falling into a death spiral.” He cited the surge in active addresses and transaction counts after the Fusaka upgrade as evidence of “fundamental improvement” and institutional adoption, but he is completely mistaken.

According to Tom Lee’s own logic, if on-chain activity on Ethereum does not reflect real usage growth and fundamental improvement, then ETH is indeed in a death spiral.

Our research shows that this is exactly what is happening.

We conducted a comprehensive analysis of on-chain data from January 2025 to February 2026. The results indicate that Lee’s claim that “institutional adoption has driven Ethereum activity growth” can actually be explained by a large number of low-value addresses engaging in address poisoning and dusting attacks. These behaviors are a result of excess block space following the Fusaka upgrade.

After the Fusaka upgrade:

• 95% of new wallet growth comes from newly created dust addresses;
• The number of poisoning attacks has increased more than threefold;
• Poisoning behaviors account for over 50% of Ethereum transaction growth;
• Currently, poisoned transactions make up 22.5% of all Ethereum transactions;

The Fusaka upgrade increased the gas limit from 45 million to 60 million, aiming to expand Ethereum Layer 1 capacity. Vitalik and the protocol team previously expected gas fees to decrease by 10%–30%, but in reality, gas fees have dropped by about 90%.

Vitalik and validators severely misjudged the demand elasticity of Layer 1. They used outdated mathematical models (based on assumptions before EIP-1559 and Layer 2 emergence), overestimating Layer 1 demand by 3 to 9 times. This is also why we believe Vitalik is selling large amounts of ETH. On January 30, Vitalik announced he would sell 16,384 ETH to fund the Ethereum Foundation’s “austerity period,” but since then, he has sold over 19,300 ETH and continues to sell.

Vitalik understands a key point that Tom Lee does not — that ETH’s token economic model has been broken.

We personally documented address poisoning on the Ethereum network. We created two new addresses and transferred funds between them. Within five minutes, we were targeted by address poisoning attacks. We encourage readers to verify this phenomenon themselves. Currently, losses caused by poisoning attacks have increased more than eightfold compared to before the Fusaka upgrade.

Additionally, increasing the gas limit has hurt Ethereum validators, whose tip earnings per unit of gas have decreased by 40%–50%. The decline in yields will weaken staking demand and high-value transaction activity, further undermining institutional adoption. This feedback loop has now started to reverse.

Meanwhile, Ethereum continues to lose market share to Solana and its own Layer 2 networks.

• Solana developer count grew by 29% in 2025;
• Ethereum developer growth was only 6%;
• Talent is leaving the Ethereum ecosystem;
• Institutions like Visa and Citigroup are choosing Solana for DeFi applications;
• Solana DEX trading volume has surpassed Ethereum’s by more than double.

During the internet bubble era, Netscape and Nokia dominated the market for over 10 years, but the true winners eventually became Google and Apple. We believe Ethereum’s situation is similar — we think ETH’s token economic model has collapsed, Tom Lee is trapped in his own stance, and ETH’s price will continue to fall.