On- and off-chain metrics within the cryptocurrency market remain subdued, analysts at Citi Securities said in a recent report. The analysis points to several key factors that indicate a cooling interest in the sector, with diminished search trends, declining network engagement, and low futures funding rates as central themes.
Search interest, a proxy for retail engagement, has dropped 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 the underlying blockchain utilization, has also been declining. Ethereum, despite seeing a peak in activity following the recent Dencun upgrade, has experienced a sharp drop in transaction fees and active addresses. Despite this, unique daily users on the Ethereum network are up around 34% across layer-1 and layer-2 chains compared to the 2023 averages.
Meanwhile, the Bitcoin network bottomed in June, “though it still sits ~29% below its 2023 average," Citi notes.
Another concerning sign is the low futures funding rates, which briefly dipped into negative territory in August. This is in addition to declining Bitcoin volumes after a sharp rise during the early August risk-off episode.
The decline in trading activity underscores the broader trend of reduced demand across the crypto ecosystem. Spot ETFs for both Bitcoin and Ethereum 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 concerning a potential soft landing or further guidance from the Federal Reserve on monetary policy.
In contrast, stablecoin market caps are continuing to rise, showing resilience despite broader market downturns. Hash rates have also been increasing, analysts highlight, rebounding after some volatility following the recent halving.