Bitcoin hasn't yet lived up to its reputation as "digital gold," says Citi

Investing.com -- Spot Ethereum ETFs are seeing net outflows in their second week of trading, much like Bitcoin ETFs did when they first launched, said Citigroup strategists.

However, unlike Bitcoin, much of Ethereum’s recent price action since the ETFs launched has been more influenced by equity market movements rather than ETF flows.

Citi analysts pointed out that the recent market correction in risky assets shows once again that crypto currently provides limited diversification benefits. They added, "Crypto fundamentals are holding up overall, as stablecoins have avoided sharp outflows and hash rate has risen despite weaker price action."

Moreover, Citi argues that Bitcoin hasn't yet lived up to its reputation as "digital gold," stating, "Despite both gold and Bitcoin being limited supply, zero-coupon instruments, the original cryptocurrency does not exhibit gold’s 'store of value' properties." They concluded that during the recent market correction, Bitcoin did not act as a safe haven, which confirms its current status as a risk asset.

Through August 5, spot Bitcoin ETF net inflows have totaled $19.1 billion. These flows have explained over 40% of the variance in weekly Bitcoin price action since the ETFs launched in January. In contrast, ETH ETFs have seen $460 million in net outflows in their first two weeks of trading. 

"The variance in price action between Bitcoin and Ethereum highlights differing investor behaviors and market reactions to these two leading cryptocurrencies. The initial ETH ETF flows have been negative, but the Bitcoin ETF launch also had a post-launch decline between days 4 and 12," Citi pointed out.

Despite the crypto selloff, certain fundamentals have held up well. Search interest in cryptocurrencies has risen, and stablecoins have not seen decent outflows. While Ethereum network activity slowed, Bitcoin activity remained relatively stable, though at low levels. 

"Hash rate remains volatile though has moved higher as of late," Citi noted. Additionally, decentralized exchange volumes continue to rise compared to centralized volumes.

Source: Investing.com