Investing.com — Cash ETFs are seeing net outflows in their second week of trading, much like the ETFs did when they were first launched, Citigroup strategists said.
However, unlike Bitcoin, much of Ethereum's recent price action since the launch of ETFs has been more influenced by stock market movements than ETF flows.
Citi analysts noted that the recent correction in the risk asset market once again demonstrates that cryptocurrencies currently offer limited diversification benefits. They added: “Crypto fundamentals hold broadly as stablecoins have avoided sharp outflows and hash rate has increased despite weaker price action.”
Furthermore, Citi argues that Bitcoin has yet to live up to its reputation as “digital gold,” stating: “Despite both gold and Bitcoin being zero-coupon, limited-supply instruments, the original cryptocurrency does not exhibit the ‘store of value’ properties of gold.” They concluded that during the recent market correction, Bitcoin failed to act as a safe haven, confirming its current status as a risk-on asset.
As of August 5, net inflows into Bitcoin spot ETFs amounted to $19.1 billion. These flows accounted for over 40% of the variation in Bitcoin’s weekly price action since the ETFs’ launch in January. In contrast, ETH ETFs saw net outflows of $460 million in their first two weeks of trading.
“The variation in price action between Bitcoin and Ethereum highlights the different investor behaviors and market reactions to these two leading cryptocurrencies. Initial ETH ETF flows have been negative, but the Bitcoin ETF launch also saw a post-launch decline between days 4 and 12,” Citi noted.
Despite the cryptocurrency sell-off, certain fundamentals have held up well. Search interest in cryptocurrencies has increased and stablecoins have not seen any decent outflows. While Ethereum network activity has slowed, Bitcoin activity has remained relatively stable, albeit at low levels.
“Hash rate remains volatile, although it has increased recently,” Citi noted. Additionally, decentralized exchange volumes continue to increase compared to centralized volumes.
