Hidden "Death Spiral" Risk! Ethereum and Bitmine targeted by short-selling institutions

Ethereum will undergo a series of major technical upgrades this year, which are highly regarded as long-term bullish factors by the market. However, the intimidating short-selling institution Culper Research believes that the Ethereum economic model is severely flawed and hidden with a “death spiral” risk, and has released a report shorting Ether and Bitmine (BMNR).
Is Culper Research’s short attack a bearish outlook or a misjudgment? It has become the most discussed topic in the crypto community.

On Thursday, Culper Research published a short report revealing short positions in Ethereum and related stocks like Bitmine. The firm pointed out that Ethereum’s “Fusaka upgrade” in December last year led to an oversupply of block space and a significant drop in transaction fees. Since validators’ income partly depends on these fees, staking yields also shrank, severely damaging the Ethereum economic model.

Culper Research warned that such changes could create a “vicious cycle”: as validator rewards continue to decline, market participation in staking will decrease, jeopardizing the security of the Ethereum network.

The report further cited Lookonchain data indicating that Ethereum co-founder Vitalik Buterin has sold nearly 20,000 ETH this year, estimated to be worth about $40 million at current prices. The report states:

Even Vitalik is offloading, while die-hard bulls like Tom Lee are still living in delusion, unaware of the new reality facing Ether.

This time, we choose to stand with Vitalik.

Earlier, Bitmine, a reserve company for Ether, CEO Tom Lee, emphasized that the number of Ethereum transactions and active addresses continues to rise, indicating strong fundamentals. However, Culper Research countered that these data are misleading, and the so-called “explosive activity” is largely due to “address poisoning attacks.”

According to Culper Research estimates, since the Fusaka upgrade, Ethereum transaction fees have dropped by about 90%. The report mentions:

Following Tom Lee’s logic, if Ethereum’s actual utility isn’t improving, it means Ether has fallen into a “death spiral.” We firmly believe this is the current scenario.

Additionally, the short report also sharply targets Bitmine, one of the world’s largest institutional buyers of Ether.