Research firm Culper Research has opened short positions on Ethereum and BitMine stocks. Analysts believe that the altcoin's economy has deteriorated following a recent network upgrade.
According to the report, the December 2025 upgrade Fusaka led to an oversupply of block space, causing transaction fees on the network to drop by approximately 90%. Validator revenues are directly tied to these fees, resulting in a sharp decline in staking profitability.
Experts suggest this initiates a negative cycle: falling yields reduce demand for locking coins, jeopardizing the blockchain's security.
Culper Research also referenced data from Lookonchain, noting that this year, Ethereum co-founder Vitalik Buterin sold about 20,000 ETH worth nearly $40 million at current prices.
“Vitalik is selling while 'bulls' like [BitMine chairman] Tom Lee fail to grasp the new reality of the asset. We side with Vitalik,” the report states.
Short sellers have challenged Lee's claims, who argued that the increase in transaction numbers and active addresses is evidence of network stability.
Culper considers these metrics distorted: a significant portion of network activity results from "address poisoning," where malicious actors flood the network with spam transactions.
“According to Lee's logic, if the asset's utility isn't growing, Ethereum has entered a 'death spiral.' We are confident that this is indeed happening,” the researchers stated.
The second part of the short targets BitMine, one of the largest corporate buyers of the second-largest cryptocurrency.
Since July, the company has acquired about 4.4 million ETH. According to DropsTab, due to the price drop, the value of these reserves has decreased by 45%. BitMine's unrealized losses have already reached $7.5 billion.
Source: DropsTab.What’s Happening with Ethereum?
The price of the second-largest cryptocurrency has fallen by 6.5% ($2057) after a brief spike to $2200. This correction followed a decline in the U.S. stock market due to global geopolitical tensions and energy supply disruptions.
Hourly chart of ETH/USDT on Binance. Source: TradingView.Investors have revised their economic growth forecasts and shifted to a risk-off strategy. Additional uncertainty arose from a U.S. court ruling that mandated the government to pay businesses $130 billion in tariff refunds.
Apathy in the Derivatives Market
On-chain data and the derivatives market indicate weak buyer interest. The annual premium on 30-day Ethereum futures remains below the neutral threshold of 5%, suggesting a lack of demand for leveraged long positions.
Source: Laevitas.ch.The skew of Ethereum options (put/call) has reached 7%. Values above 6% typically indicate that major players and market makers are buying insurance against further price declines. The caution of experienced traders gives bears room to intensify pressure on the price.
Source: Laevitas.ch.Scenario for a New Altseason
In the next altcoin season, assets from projects with real applications and active user bases will benefit, said Bitwise's Chief Investment Officer Matt Hougan. He noted that the euphoria of past cycles, where all cryptocurrencies surged, will not be repeated.
“I think that game is over. We are heading for an unconventional altseason that will reward coins with real adoption,” Hougan remarked.
Typically, traders expect a standard scenario: Bitcoin hits new highs, followed by capital flowing into Ethereum, then into the DeFi sector, and finally into NFTs. Hougan doubts this cycle will work again and that investors will rush to buy “pictures of rocks.”
He predicts the market will become more selective. Investors will favor tokens backed by sustainable business models and functional products. The upcoming altseason will be more differentiated, the executive concluded.
Recall that in February, investors withdrew 31.6 million ETH from centralized exchanges—the highest monthly volume since November 2025.