The cryptocurrency market continues to lag behind other risk assets due to weakening demand, and Citi predicted in a research report on Friday that the crypto market will continue to be highly correlated with stocks. This means that cryptocurrencies will continue to move in parallel with traditional risk assets.

According to Citi’s report, both bitcoin and ether (ETH) spot exchange-traded funds (ETFs) experienced outflows. The fact that Bitcoin ETFs and ether ETFs experienced net outflows shows that investors’ interest in cryptocurrencies has decreased and there is uncertainty in the market.

“ETFs have experienced net outflows, layer 1 activity has fallen or paused, and financing rates remain at very low levels,” analysts wrote.

Funding rates represent the difference between perpetual futures and the spot price of digital assets. A positive funding rate consistently indicates futures are trading above the spot price and increased demand for optimistic bets.

The bank noted that the crypto market will continue to be highly correlated with stocks along with macroeconomic events, particularly with the macro calendar starting with today’s Nonfarm Payrolls report.

This shows that cryptocurrency markets are sensitive to broad economic indicators and changes in these indicators can have significant effects on cryptocurrency prices.

Recent weakness in digital assets has led to reduced energy consumption and “weaker production cost model outputs” by bitcoin (BTC) miners. This shows that the profitability of bitcoin mining has decreased and miners have started to produce less with lower energy consumption.

The report highlighted that Bitcoin hashrate has reached the upper end of its recent range, an indicator of industry competition and mining difficulty. Hashrate refers to the total computing power used to transact and mine a proof-of-work blockchain.

Meanwhile, the market cap of stablecoins continues to grow and ignores recent market weakness. Stablecoins are digital assets used to provide value stability in the cryptocurrency market and are generally less affected by market fluctuations.

This shows that stablecoins remain popular among investors and are used as a hedge against fluctuations in the cryptocurrency market.

Activity also began to decline on the Ethereum blockchain and stalled on the Bitcoin network. This indicates a slowdown in the performance of the Ethereum and Bitcoin blockchains and a decrease in the demand for transactions on these networks.

Rival Wall Street bank JPMorgan expressed a similar view on Friday. JPMorgan noted that the crypto ecosystem lacks major triggers in the short term and digital assets may be more sensitive to macro factors. This means that cryptocurrencies may be more sensitive to changes in economic and market conditions.