Ethereum has seen a sharp record increase in daily transactions and active addresses, but this spike is unlikely to signal a healthy expansion of the network, according to an analysis by Wall Street investment bank Citi.
“This trading trend is often associated with ‘address poisoning’ fraud campaigns,” analysts Alex Saunders and Bing Vo said in a report Thursday.
A closer look at the data shows that much of the new activity consists of transactions of less than $1, a pattern more often associated with “address poisoning” fraud than organic user recruitment, the bank said.
Analysts explained that in address poisoning campaigns, malicious attackers send small amounts of virtual currency from wallet addresses that are very similar to wallet addresses frequently used by victims, with the aim of tricking users into accidentally sending funds to the wrong destination in future transactions.
The report notes that Ethereum’s currently low transaction fees make it cheap and easy for attackers to generate large volumes of this type of activity, inflating key network metrics without reflecting actual demand.
This trend was noted this week by on-chain researcher Andrei Sergenkov, who said that the recent spike in Ethereum activity is closely tied to stablecoins, which account for about 80% of the unusual increase in new addresses.
During his investigation, Sergeenkov tracked USDT and USDC transfers of less than $1 and identified senders distributing these small amounts to at least 10,000 unique addresses. The largest of these was a smart contract that sent small amounts of stablecoins to hundreds of thousands of wallets, funded by features designed to fund large batches of poisoned addresses in a single transaction.
“malicious act”
Despite the explosion in on-chain activity, Ether’s $ETH$2,938.24 Price performance lags compared to Bitcoin $BTC$89,277.11 over the same period, $BTC While maintaining a more stable gain, $ETHvaluations show greater volatility.
Ether price flat this year, slow performance $BTCup 2.4% over the same period. but, $ETH performed slightly better than $BTC In the past 6 months.
According to Citi analysts, Ethereum’s apparent surge stands in stark contrast to Bitcoin, where on-chain user activity continues to decline rather than skyrocket.
This discrepancy highlights the possibility that Ethereum’s recent burst of activity is a network-specific phenomenon caused by “malicious activity” rather than a sign of broader growth in the cryptocurrency market as a whole.
Wall Street rival JPMorgan (JPM) is also skeptical about Ethereum’s growth prospects.
The bank said in a report on Wednesday that while the network’s December Fusaka upgrade led to an immediate drop in fees along with a surge in transactions and active addresses, there are doubts whether the recovery will last given competition from layer 2 blockchains and rival chains.
read more: Ethereum upgrade spikes activity, but JPMorgan doubts it will last