The crypto market has struggled since the launch of spot ether ETFs, the report said.
Citi noted that spot bitcoin and ether ETFs have seen net outflows in the past month.
Stablecoins have been the outlier, with market caps continuing to grow, the bank said.
The bank noted that other risk assets have also been weak over this period, but crypto has underperformed since the post-nonfarm payrolls (NFP) rebound, on a volatility-adjusted basis. Nonfarm payrolls is a U.S. employment report usually published on the first Friday of every month.
“Crypto demand has dried up in recent weeks,” the report said, adding that spot bitcoin (BTC) and ether ETFs have seen net outflows in the last month.
“These outflows have also coincided with relatively muted search interest and subdued network activity,” analysts led by David Glass wrote.
This weaker demand is also evident in futures funding rates, which briefly turned negative in August, the bank said.
Citi said that ETF flows may continue to disappoint until the market has more transparency on the “soft-landing versus hard-landing outcome” for the U.S. economy.
Stablecoins have bucked this recent negative trend in digital assets, with supply continuing to grow despite the market correction in August, the report added.
A stablecoin is an type of cryptocurrency that is usually pegged to the U.S. dollar, though some other currencies and assets such as gold are also used.
