Ethereum saw a record surge in daily transactions and active addresses, but the rise is unlikely to be a sign of healthy network expansion, according to analysis by Wall Street investment bank Citi.
“This trading trend is often associated with ‘address poisoning’ scam campaigns,” analysts Alex Saunders and Vinh Vo wrote in Thursday’s report.
A closer look at the data shows that much of the new activity consists of transactions valued at less than $1, a pattern more commonly associated with “address poisoning” scams than organic adoption by users, the bank said.
Analysts explained that in address poisoning campaigns, bad actors send small amounts of crypto from wallet addresses that closely resemble those that victims frequently use, hoping to trick users into mistakenly sending funds to the wrong destination in future transactions.
Ethereum’s currently low transaction fees make it easy and cheap for attackers to generate large volumes of this type of activity, thereby inflating overall network metrics without reflecting actual demand, the report notes.
This trend was highlighted this week by on-chain researcher Andrey Sergeenkov, who said that the recent jump in Ethereum activity is closely linked to stablecoins, which account for about 80% of the unusual growth in new addresses.
During his research, Sergeenkov tracked USDT and USDC transfers below $1 and isolated senders who distributed these small amounts to at least 10,000 unique addresses. The largest of these were smart contracts that sent small amounts of stablecoins to hundreds of thousands of wallets, funded by a function designed to fund large batches of poison addresses in a single transaction.
“Malicious behavior”
Despite the explosion in on-chain activity, ether ETH$2,938.24 Price performance lags behind Bitcoin BTC$89,277.11 over the same period, with BTC maintain more stable gains while ETHThe valuation of has shown greater volatility.
Ether price remained stable this year, underperforming BTCwhich increased by 2.4% over the same period. However, ETH performs slightly better than BTC over the last six months.
According to Citi analysts, Ethereum’s apparent rise stands in stark contrast to Bitcoin, where on-chain user activity has continued to decline slightly rather than increase.
This divergence highlights the likelihood that Ethereum’s recent burst of activity is network-specific and driven by “malicious behavior,” and not a sign of broader growth in the crypto market.
Wall Street rival JPMorgan (JPM) is also skeptical of Ethereum’s growth prospects.
The bank said in a report on Wednesday that while the Fusaka network upgrade in December saw an immediate drop in fees alongside an increase in transactions and active addresses, it questioned whether the rebound would persist given competition from layer 2 blockchains and rival chains.
Learn more: Ethereum upgrade triggers spike in activity, but JPMorgan doubts it will last