Wall Street Shorts ETH: Vitalik is aware and has front-run, while Tom Lee remains oblivious

Source: Culper Research

Compiled by: Azuma, Odaily Planet Daily

Editor’s Note: On March 6, Wall Street short-selling firm Culper Research suddenly published a statement announcing that it is shorting ETH and related securities such as BMNR. Culper Research's logic is that Vitalik and other developers miscalculated the demand elasticity of Ethereum before the Fusaka upgrade, resulting in the upgrade damaging ETH's token economic model. Culper Research also mentioned that Vitalik is well aware of this and is taking action to get ahead, while the oblivious Tom Lee is heading towards a dead end.

In response to the institution's aggressive shorting, neither Vitalik nor Tom Lee has publicly responded, but Vitalik's father, Dmitry Buterin (dima.eth), did respond, stating: "Once you see the phrase 'Vitalik knows this and is selling,' you don't need to read further. They are attention-seeking clowns, not researchers."

Below is the original content from Culper Research, compiled by Odaily Planet Daily. Compiling this article does not imply our agreement with Culper Research's views; it is merely to present a perspective from some Wall Street institutions regarding ETH and market manipulation.

Recent disclosures indicate that we are shorting 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 damaged. Vitalik is well aware and is selling; meanwhile, ETH's most steadfast bull, Tom Lee, continues to make ineffective investments. ETH will continue to decline.

Tom Lee's Bitmine has consistently defended ETH, claiming that "due to increasing utility, ETH is not in a death spiral." He cited the surge in active addresses and transaction numbers on Ethereum post-Fusaka upgrade as evidence of so-called "fundamental improvement" and institutional adoption, but he is completely mistaken.

According to Tom Lee's own logic, if Ethereum's on-chain activity 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, and the results indicate that the "institutional adoption has led to increased Ethereum activity" claimed by Lee can actually be explained by a large number of address poisoning and wallet dusting behaviors. These behaviors are triggered by the 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 behavior accounts for over 50% of Ethereum's transaction growth;
• Currently, poisoning transactions account for 22.5% of all Ethereum transactions;

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

Vitalik and the validators have made a serious miscalculation regarding Layer 1 demand elasticity. They used outdated mathematical models (based on assumptions prior to EIP-1559 and before Layer 2 emerged), leading to an overestimation of Layer 1 demand by 3 to 9 times. This is also why we believe Vitalik is selling ETH in large quantities. On January 30, Vitalik announced in advance that 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 something that Tom Lee does not—ETH's token economic model has been damaged.

We personally documented the address poisoning situation on the Ethereum network. We created two new addresses and transferred funds between them. Within 5 minutes, we were subjected to an address poisoning attack. We encourage readers to verify this phenomenon themselves. Currently, the rate of losses due to poisoning attacks has increased by more than 8 times compared to before the Fusaka upgrade.

Moreover, the increase in gas limit has also impacted the Ethereum validator community, with validators now earning 40% to 50% less in tips per unit of gas. The decline in yield will weaken staking demand and high-value transaction activity, further undermining institutional adoption. This flywheel has now begun to turn in reverse.

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

• The number of Solana developers increased by 29% in 2025;
• Ethereum developers grew by only 6%;
• Talent is leaving the Ethereum ecosystem;
• Institutions like Visa and Citigroup have chosen Solana for DeFi applications;
• The trading volume on Solana DEX has already surpassed that of Ethereum by more than 2 times.

During the internet bubble era, Netscape and Nokia dominated the market for over 10 years, but ultimately, the real beneficiaries were Google and Apple. We believe Ethereum's situation is similar— we think Ethereum's token economic model has collapsed, Tom Lee is trapped in his own position, and the price of ETH will continue to decline.