Since the advent of spot ether (ETH) exchange-traded funds (ETFs) in the U.S. on July 23, the cryptocurrency market has found itself in a state of pronounced struggle, as highlighted by Citi in a recent research report released on Friday. While other high-risk assets have also exhibited signs of weakness during this period, the cryptocurrency sector has notably underperformed, especially following the brief rebound post-nonfarm payrolls (NFP) data—a key U.S. employment report typically issued on the first Friday of each month.

“Demand within the crypto space has significantly waned over recent weeks,” the report observed, pointing out that both spot bitcoin (BTC) and ether ETFs have experienced net outflows during the past month. These outflows have occurred in tandem with a marked decline in search interest and a noticeable reduction in network activity, according to analysts led by David Glass.

The subdued demand is further reflected in the futures funding rates, which momentarily dipped into negative territory in August, signaling a broader hesitance among market participants. Citi’s report suggests that ETF inflows may continue to underwhelm until greater clarity emerges regarding the “soft-landing versus hard-landing outcome” for the U.S. economy—a reference to the potential economic scenarios following the Federal Reserve’s monetary policy adjustments.

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Interestingly, while the broader digital asset market has faced headwinds, stablecoins have defied this downward trend, with their supply continuing to expand despite the broader market correction in August. Stablecoins, a subset of cryptocurrencies typically pegged to the U.S. dollar (though sometimes linked to other currencies or assets like gold), have shown resilience even as other digital assets falter.

As the crypto market navigates these turbulent waters, the launch of spot ether ETFs, initially heralded as a pivotal moment, has instead coincided with a period of diminished enthusiasm and participation within the sector. The path forward may hinge on broader economic developments, with the crypto market waiting for a clearer signal of what lies ahead.