The problem could be caused by the target running at 1 MHz with code built for a processor running at 8 MHz.
If it is of any help, I just tried a Attiny85 running at 1MHZ and selected board Attiny85 @ 8MHZ and got:
--- Knock-Bang fault: 11 ---
With the same target and selcting board Attiny85 @ 1MHZ it works as expected (Output to the serial monitor looks as it should)