Cryptocurrency Market Analysis: Citi Securities Report Shows Cooling Interest
In a recent report by Citi Securities, analysts have highlighted on- and off-chain metrics within the cryptocurrency market that remain subdued. This analysis points to various key factors indicating a decrease in interest in the sector, including diminished search trends, declining network engagement, and low futures funding rates.
Search interest, which serves as a proxy for retail engagement, has significantly dropped. Google search volumes for Bitcoin and Ethereum have retreated to near-recent lows after a brief resurgence.
Network activity, an essential measure of underlying blockchain utilization, has also seen a decline. Despite a peak in activity following the recent Dencun upgrade, Ethereum has experienced a sharp drop in transaction fees and active addresses. However, unique daily users on the Ethereum network have increased by around 34% compared to 2023 averages.
The Bitcoin network bottomed in June but still sits ~29% below its 2023 average, as noted by Citi. Additionally, low futures funding rates briefly dipped into negative territory in August, coupled with declining Bitcoin volumes after a sharp rise during the early August risk-off episode.
The decline in trading activity highlights a broader trend of reduced demand across the crypto ecosystem, with spot ETFs for Bitcoin and Ethereum experiencing net outflows over the past month. Analysts suggest that these subdued metrics may persist until there is greater clarity on the broader economic outlook, particularly concerning potential soft landings or further guidance from the Federal Reserve on monetary policy.
On the other hand, stablecoin market caps continue to rise, showing resilience despite broader market downturns. Hash rates are also increasing, rebounding after some volatility following the recent halving.
Analysis:
The cryptocurrency market is currently experiencing a cooling interest, with key factors such as declining search trends, network engagement, and futures funding rates contributing to this trend. Investors should pay attention to these metrics as they may persist until there is more clarity on the economic outlook. Additionally, the rise in stablecoin market caps and increasing hash rates indicate some resilience in the market despite the overall downturn. It is essential for investors to stay informed and monitor these metrics to make informed decisions about their investments in the cryptocurrency space.