Culper Research predicts decline for Ethereum, takes short position
March 6, 2026
Culper Research, a research firm, has recently taken short positions in Ethereum and BitMine’s shares, raising concerns about the altcoin’s economic conditions following a network upgrade. The analysts argue that the Fusaka upgrade in December 2025 resulted in excess block space, leading to a significant decrease in transaction fees by approximately 90%. As validator revenues are directly impacted by these fees, staking profitability has declined as a result.
The report from Culper Research highlights that this decrease in yields has created a negative feedback loop, where lower demand to lock up coins poses a threat to the security of the blockchain. In addition, they referenced Lookonchain data indicating that Ethereum co-founder Vitalik Buterin has sold a substantial amount of ETH, nearly $40 million worth at current prices.
The research report mentioned that Buterin’s decision to sell is supported by the fact that assets like Tom Lee, chairman of BitMine, are failing to understand the new reality of the asset. The short-sellers have raised doubts about Lee’s claims regarding the network’s stability, particularly his references to increasing transactions and active addresses. Culper Research believes that these metrics are misleading as a significant portion of network activity stems from address “poisoning”, where bad actors engage in spam transactions.
Despite Lee’s optimistic views, Culper Research remains confident that ether is currently in a ‘death spiral’, based on the lack of real utility and growth in the asset. Their skepticism extends to BitMine, one of the largest corporate buyers of Ethereum, whose reserves have declined in value by 45% due to the recent price slump.
Following the decline in the US stock market, the price of ether experienced a 6.5% drop to $2,057 after briefly reaching $2,200. Investors have become more risk-averse, with the ongoing geopolitical tensions and disruptions in energy supplies adding to the uncertainty. The derivatives market indicates weak buyer interest, with the premium on 30-day ether futures remaining below neutral levels and the options skew suggesting that market makers are buying protection against further downside.
Looking ahead, Bitwise chief investment officer Matt Hougan anticipates a more selective market during the next altcoin season, favoring assets with real-world applications and active user bases over speculative tokens. He believes that the days of indiscriminate altcoin rallies are over, and investors will prioritize tokens with sustainable business models and tangible products. This shift towards a more differentiated market is expected to shape the future of altcoin trading.
