Ethereum (ETH) ETFs have struggled since their launch in July 2024, recording net outflows of $610 million, while Bitcoin ETFs recorded net outflows of $330 million during the same period.

The world’s second-largest cryptocurrency has consistently underperformed Bitcoin since its launch, and its share of the global cryptocurrency market has been steadily withering.

Meanwhile, Ethereum Layer 1 activity has remained subdued, even as Layer 2 usage has grown significantly. According to Citi analysts, this trend could change following the risk-friendly stance taken by the Federal Open Market Committee (FOMC) in September.

“If the broad risk-on market environment continues, cryptocurrencies and ETH could gain support and potentially reverse net ETF outflows,” Citi analysts said in a note, although this would require improved activity on the Ethereum network.

The dovish FOMC decision has seemingly halted ETH’s decline against BTC, as the pair has fallen slightly since the meeting. Still, the challenge remains significant: only about 30% of trading days saw positive net inflows into ETH spot funds.

Citi points out that for Ethereum to regain significant market share, a revival of activity at Layer 1 will be necessary.

“While Layer 2 network activity was strong (especially for Base), the number of active L1 addresses was limited, which may explain the cryptocurrency’s weaker performance in recent weeks,” the analysts noted.

While Ethereum has seen outflows, Bitcoin ETFs continue to attract attention, with a total net inflow of $17.2 billion since their launch.

Bitcoin’s first-mover advantage, combined with its status as “digital gold,” has helped it surpass ETH in both inflows and market dominance. In fact, BTC’s share of global cryptocurrency market capitalization has been steadily increasing since January 2024.

The correlation between cryptocurrencies and U.S. stocks has skyrocketed in recent weeks, driven by macroeconomic factors like jobs data and the trajectory of the Federal Reserve’s policy. Citi notes that this link is expected to remain forceful as markets gain clarity on the economic outlook and potential regulatory changes, especially with the upcoming U.S. presidential election.

Stocks have become the dominant macro driver for cryptocurrencies. Interestingly, the cryptocurrency-USD correlation turned positive on August 5, a rarity in recent years.

Regardless, while fears of a monetary devaluation that could boost both cryptocurrencies and gold are not significant at this stage, Citi analysts continue to monitor any signs of their re-emergence.