Ethereum continued its downward slide, touching its lowest price since August 19 this year. The cryptocurrency has lost more than 31.5% from its highest level in August, with technical indicators and fundamentals pointing to more possible declines.
Culper Research issues warning on Ethereum
Culper Research, a New York-based investment research firm known for raising early alarms on high-profile cases, has placed Ethereum under renewed scrutiny. The group previously gained attention for exposing details surrounding Jensen Huang, whose resignation as the CEO of Nvidia followed a widely reported investigation.
In March, Culper Research disclosed a short position against Ethereum, citing concerns about its long-term prospects. The firm also reported a short position in BitMine, currently the largest institutional Ethereum holder.
According to its report, Culper Research described Ethereum as being in a “death spiral” following last year’s Fusaka upgrade. The group argued that base fees collected on the Ethereum network are falling, resulting in less ETH being burned through EIP-1559. This decrease in token burns undermines Ethereum’s narrative of being a deflationary asset.
Recent data from blockchain analytics platform DeFi Llama supports these concerns, revealing that Ethereum generated only $27.3 million in fees this quarter, compared to $34 million in the previous quarter. Over the year, Ethereum accrued $153 million in fees, significantly down from $523 million last year.
DeFi Llama data shows Ethereum’s fee revenue dropped from $523 million last year to $153 million this year, highlighting a sharp decline in on-chain activity.
Despite apparent growth in Ethereum wallet numbers, Culper Research noted most of this was likely connected to spam. The firm’s analysts pointed to evidence that 22% of all Ethereum transactions were linked to address poisoning, raising questions about the quality of network activity.
Additionally, Culper Research stated that Ethereum co-founder Vitalik Buterin has continued to sell portions of his ETH holdings, which they interpret as a signal of waning confidence in the coin’s short-term outlook.
Mini dictionary: Culper Research is a boutique investment research and due diligence firm known for producing investigative reports on publicly traded companies, often taking positions against those they believe are overvalued or at risk of underperformance.
ETF outflows and declining open interest
Additional pressure on Ethereum’s price stems from significant outflows in spot Ethereum ETFs. Data shows that outflows reached $766 million this month and totaled $2.6 billion in recent weeks, following a $1.6 billion loss last month. These continued outflows indicate diminished institutional appetite for Ethereum products, which has weighed on the market.
Ethereum’s futures open interest has also weakened, dropping by 6.5% in the past 24 hours to $23.5 billion. Earlier this year, open interest in Ethereum futures peaked at over $60 billion. Falling open interest is commonly regarded by analysts as a sign that traders expect further declines in price.
| Metric | Current Value | Previous Peak |
|---|---|---|
| ETF Outflows (Recent Period) | $2.6 billion | – |
| Futures Open Interest | $23.5 billion | $60 billion |
| Quarterly Fees | $27.3 million | $34 million (prior quarter) |
| Annual Fees | $153 million | $523 million (last year) |
Exchange-driven liquidations have also contributed to the selling pressure, as platforms unwound leveraged positions amid the falling price trend.
Technical outlook suggests further downside
Technical analysis indicates Ethereum may face more downward movement. The cryptocurrency is nearing a “death cross,” where the 50-day moving average drops below the 200-day moving average—a setup traditionally viewed as bearish for an asset’s price.
Ethereum has slipped below the key 61.8% Fibonacci retracement level, reinforcing the bearish sentiment. Analysts point to $1,500 as the next major support to watch, while a bounce above the 50% retracement level at $2,157 could invalidate the bearish outlook and point to a potential reversal.
Technical analysts expect the path of least resistance for Ethereum remains to the downside unless it can recover a key support above $2,157.
