Analysts at Citi Securities said in a recent report that on- and off-chain metrics within the cryptocurrency market remain subdued. The analysis points to several key factors that indicate cooling interest in the sector, with reduced search trends, declining network participation, and low futures funding rates as central themes.
Search interest, a proxy for retail engagement, has fallen significantly. After a brief resurgence, Google search volumes for both Bitcoin and Ethereum have retreated to near-recent lows.
Network activity, a key measure of underlying blockchain usage, has also been declining. Ethereum, despite seeing a spike in activity following the recent Dencun upgrade, has seen a sharp drop in transaction fees and active addresses. Despite this, unique daily users on the Ethereum network are up around 34% on both layer 1 and layer 2 chains compared to 2023 averages.
Meanwhile, the Bitcoin network bottomed in June, “although it is still roughly 29% below its 2023 average,” Citi notes.
Another worrying sign is the low futures funding rates, which briefly dipped into negative territory in August. This adds to declining Bitcoin volumes after a sharp rise during the risk-off episode in early August.
The decline in trading activity underscores the broader trend of reduced demand across the cryptocurrency ecosystem. Both Bitcoin and Ethereum spot ETFs have seen net outflows over the past month.
Analysts believe these subdued metrics may persist until there is greater clarity on the broader economic outlook, particularly regarding a potential soft landing or further guidance from the Federal Reserve on monetary policy.
In contrast, stablecoin market caps continue to rise, demonstrating resilience despite broader market declines. Hash rates have also increased, analysts note, recovering after some volatility following the recent halving.
