Why Active Ethereum Wallets Have Spiked Above 1M For First Time In 6 Years

Ethereum ETH/USD saw a massive surge in transaction volume on Thursday. On-chain clues led analysts to the root cause behind the sudden uptick in activity.

What Happened: On July 28, Ethereum’s daily active addresses surged above one million for the first time in six years.

The last time the network saw such a sharp surge in daily address activity was when ETH underwent a DDoS (distributed denial-of-service) attack in 2016.

CoinMetrics analyst Kyle Waters looked into the blockchain data and was able to conclude that the reason behind the uptick in activity did not warrant any real reason for alarm or optimism.

2/ The first clue is looking at the number of active receiving and sending addresses. The number of active sending addresses spiked yesterday while the number of receiving addresses stayed basically the same. This signals some sort of consolidation pattern. pic.twitter.com/hWDb2t76XY

— Kyle Waters (@kylewaters_) July 27, 2022

Waters observed that the size of transfers was relatively small, falling between $100 and $1,000. After analyzing the nature of ETH transfers, he was able to conclude that the transfers corresponded to Binance consolidating its hot wallets.

7/ In total, Binance 14 received 621,691 inbound ETH transfers from 11:30 pm July 25 UTC to noon July 26. The average amount transferred was 0.45 ETH, corresponding to the small transfer count at the daily level. Total ETH held by the acct increased by roughly 285K ETH. pic.twitter.com/bLXLAk328T

— Kyle Waters (@kylewaters_) July 27, 2022

The analyst said that the one-day jump in address activity should not be construed as real growth, but rather just noise.

Conor Grogan, a strategy executive at Coinbase Global Inc COIN, expressed a similar view on Twitter.

“Counter-intuitively, I don't think this means that Ethereum has greater adoption than any previous time period. It means that send and receive addresses per unit of gas was at highs,” he said. 

Said differently, the per-transaction average for computational demand/storage on Ethereum was probably around 5 year lows today.

— Conor (@jconorgrogan) July 28, 2022

Price Action: According to data from Benzinga Pro, ETH was trading at $1,723, up 4.63% in 24 hours.