The downgrade marks a sharp shift from Citi’s previous outlook, which assumed the passage of U.S. legislation on digital asset market structure would spur adoption among financial advisors and traditional investors. The bank now believes that timeline has been pushed back, leaving the market without a significant catalyst.
Saunders said ETF flows remain the main force behind cryptocurrency prices, with recent demand turning negative as investors move away from risk.
According to the bank’s analyst, sentiment has also been affected by concerns that digital asset treasury (DAT) companies could become net sellers of bitcoin. Strategy’s recent corporate actions amplified those fears despite involving relatively modest BTC sales.
The report noted that both bitcoin and ether remain below key technical levels, including their 200-day moving averages, while speculative capital has shifted toward AI-related investments.
The bank’s revised forecasts assume flat ETF flows in its base case. In its bullish stance, increased retail and institutional adoption lifts bitcoin to $108,000 and ether to $2,932. His bearish argument, based on recessionary macroeconomic conditions and continued ETF outflows, sees BTC fall to $53,000 and ETH to $1,094.
While the bank’s equity strategists have become more constructive on US stocks, providing some support through cryptocurrency stock correlation, the report says positive macroeconomic factors are insufficient to offset weakening flows.
