Ethereum 'Death Spiral' Claims Follow 612% Surge in Poisoning Attacks

Edgen Crypto·Mar 13 2026, 06:05

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Key Takeaways

A 612% surge in Ethereum address poisoning attacks following the December 2025 Fusaka upgrade has ignited a fierce debate over the network's fundamental health. Short-sellers cite the malicious activity as evidence of a 'death spiral,' while network data points to strong underlying metrics, including deflationary pressure and stable validator participation.

Address poisoning attacks targeting USDT increased by 612% in the 90 days after the Fusaka upgrade, which lowered transaction fees.
Short-selling firm Culper Research claims this spam accounts for 95% of new wallet growth and 22.5% of all transactions, forming its bearish thesis.
Network defenders counter that dust attacks represent only 4% of activity when excluding Layer-2s, and Ethereum burned $1.2 billion in ETH in February 2026.

Address Poisoning Attacks Surge 612% After Fusaka Upgrade

Security vulnerabilities on the Ethereum network have intensified following the Fusaka upgrade on December 3, 2025, which inadvertently lowered costs for malicious actors. In the 90 days after the upgrade, address poisoning attacks—a scam where users are sent dust amounts of crypto from fraudulent wallets mimicking legitimate addresses—escalated dramatically. According to a report from Etherscan, attacks related to USDT transfers increased by 612% to 29.9 million instances, while those involving USDC rose 473% to 14.9 million. These scams have inflicted significant financial damage, with research confirming at least $79.3 million in user losses between July 2022 and June 2024.

Short Sellers Claim 95% of Wallet Growth Is Fake

Activist short-selling firm Culper Research has seized on this data to build a bearish case against Ethereum, announcing a short position and claiming the network is entering a "death spiral." The firm alleges that the apparent growth in network usage is an illusion created by this malicious activity. According to Culper's analysis, approximately 95% of new wallet growth since the Fusaka upgrade is attributable to spam wallets created for dusting attacks. The firm also claims this activity now accounts for 22.5% of all Ethereum transactions. This interpretation frames the 90% drop in median gas fees post-upgrade not as a feature, but as a flaw that has eroded validator revenues and signaled weakening tokenomics.

Network Metrics Show $1.2B Burned as Staking Holds Firm

Defenders of the network argue that the bearish thesis ignores critical context and opposing on-chain data. They contend that the 90% decline in median gas fees to around $0.20 was the intended outcome of the Fusaka upgrade, designed to make the mainnet more affordable and encourage activity on Layer-2 solutions. Despite lower fees, the network's deflationary mechanism remains robust, with approximately $1.2 billion worth of ETH burned in February 2026, outpacing the network's 0.8% annual inflation. Furthermore, analysis adjusted for Layer-2 batch transactions shows dust-only transactions constitute just 4% of activity, not 22.5%. Network fundamentals appear stable, with staked ETH totaling 19 million coins—about 66% of the circulating supply—and validator yields holding steady near 4-5% in March 2026.