Short-selling firm Culper Research says it has taken a bearish position against Ethereum’s native token and companies closely tied to it, arguing that the blockchain’s economic model is deteriorating following recent network changes.

Short seller Culper targets Ethereum and BitMine in bearish report

In a report published March 5, Culper disclosed it is shorting Ethereum (ETH) as well as equity linked to the asset, including BitMine Immersion Technologies, a firm that has built a large treasury position in the cryptocurrency.

The report argues that Ethereum’s recent upgrades, designed to increase block capacity and reduce transaction costs, have had an unintended consequence: sharply reducing fee revenue that supports the network’s validator incentives.

Culper said Ethereum’s fee generation has collapsed in recent months, undermining the narrative that the network’s tokenomics are strengthening over time.

Ethereum’s fee revenue has collapsed, and with it the economic engine that once justified ETH’s valuation, the report stated.

According to the firm, the drop in fees is eroding staking yields for validators, potentially weakening long-term incentives to secure the network. Culper described the dynamic as a possible “death spiral,” in which falling economic rewards discourage participation while further undermining network security and investor confidence.

The report also singles out BitMine, which has accumulated millions of dollars worth of ether as part of a corporate treasury strategy. Culper argues the company’s valuation is heavily tied to the price of ETH and could face significant downside if the cryptocurrency continues to struggle.

Culper’s report also highlights recent on-chain transactions from wallets associated with Buterin, arguing that the Ethereum co-founder has sold tens of thousands of ETH this year, which the firm says undermines bullish narratives around the asset.

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

Culper also pushed back on bullish interpretations of rising Ethereum transaction counts and address activity, arguing that some of the increase may stem from spam-like on-chain activity such as address-poisoning or dusting transactions rather than organic user growth.

The short thesis arrives amid a period of volatility for crypto markets, with Ether and other major digital assets facing renewed scrutiny over their long-term economic models as scaling upgrades and layer-2 adoption reshape the blockchain ecosystem.