Citi has struck a cautious note on crypto markets, saying a brief lift from hopes of new US legislation has faded as progress in Washington slows and investor sentiment turns defensive.
The bank said optimism around draft digital-asset rules in the US proved short-lived. The proposals remain stuck in committee and have drawn a muted response from the crypto industry itself, limiting their impact on prices and investment flows.
Bitcoin has since moved in line with broader “risk-off” markets, according to Citi, as geopolitical tensions unsettled investors. That pattern once again undermines the idea that the token acts as a safe haven in times of stress.
Ethereum’s recent jump in network activity also came with a health warning. Citi said much of the increase appears linked to so-called “address poisoning” scams, where fraudsters generate misleading transactions, rather than genuine growth in usage.
While links between crypto prices and listed crypto-related shares have weakened, Citi said correlations remain high. Flows into Bitcoin exchange-traded funds have been a major driver of returns, suggesting institutional involvement is still building, but only gradually.
Looking ahead, Citi said clearer regulation could still act as a catalyst for renewed interest. US senators are working on draft legislation through the banking and agriculture committees, which would then need to be aligned with the House-approved Clarity Act.
With tight deadlines ahead of the November mid-term elections, the window for progress is narrowing.