The Ethereum (ETH) exchange-traded fund (ETF) has struggled since its inception in July 2024, recording web outflows of $610 million, whereas the Bitcoin ETF confronted web outflows of $330 million in the identical interval.

The world's second-largest cryptocurrency has constantly underperformed Bitcoin since its launch, and its share of the worldwide crypto market capitalization has steadily declined.

In the meantime, Layer 1 Ethereum exercise stays subdued regardless of a big improve in Layer 2 utilization, a development that Citi analysts say might change following the Federal Open Market Committee's (FOMC) extra risk-tolerant stance in September.

“If the broader risk-on market setting persists, cryptocurrencies and ETH might discover help and reverse ETF web outflows,” Citi analysts stated in a word, which might require improved exercise on the Ethereum community.

The dovish FOMC resolution seems to have halted the decline of ETH in opposition to BTC, with the ratio declining barely because the assembly, however the problem stays vital, with solely round 30% of buying and selling days seeing optimistic web inflows into spot ETH funds.

Citi famous that for Ethereum’s market share to recuperate considerably, it might want to see elevated Layer 1 exercise.

“Layer 2 community exercise has been robust (particularly on the base), whereas layer 1 lively addresses have been subdued, which can be one of many causes for the coin’s underperformance in current weeks,” the analyst famous.

Whereas Ethereum has seen outflows, the Bitcoin ETF, in distinction, continues to draw consideration, with web inflows reaching $17.2 billion since its inception.

Bitcoin's first-mover benefit and standing as “digital gold” have mixed to trigger it to surpass ETH when it comes to each inflows and market dominance. Actually, BTC's share of the worldwide cryptocurrency market capitalization has been steadily growing since January 2024.

The correlation between cryptocurrencies and U.S. shares has soared in current weeks because of macroeconomic components corresponding to employment knowledge and the Federal Reserve's coverage trajectory. Citi notes that this relationship is predicted to stay robust because the market good points readability on the financial outlook and potential regulatory modifications, particularly with the U.S. presidential election approaching.

Equities have emerged as a key macro driver for cryptocurrencies, notably because the correlation between the cryptocurrency and the US Greenback turned optimistic on August 5, a uncommon occasion lately.

In the meantime, fears of forex depreciation that would increase each cryptocurrencies and gold aren’t as pronounced at this stage, however Citi analysts are keeping track of them for indicators of a rally.