Investing.com -- Ethereum (ETH) has been noticeably underperforming in the crypto market year-to-date, registering a decline of roughly 22%. But while user activity has been volatile recently, Ethereum’s fundamental backdrop “is not all that murky,” according to Citi strategists.

Although network activity for the world’s second-biggest cryptocurrency has not been particularly strong, with much of the user growth shifting to Layer 2 (L2) networks and the Solana blockchain, the total value locked (TVL) in Ethereum terms is increasing.

Furthermore, there has been a positive trend in ETF flows and search interest.

“Also, for what it’s worth, Trump-linked World Liberty Financial holds $200mm+ of ETH, which could be seen as additional motivation for ensuring the US strengthens its support for the crypto industry,” Citi strategists led by Alex Saunders added.

“In our view, relative ETH and alt-coin performance may serve as a gauge for how optimistic the industry is regarding follow-through on regulatory clarity in the US,” they added.

Bitcoin , on the other hand, has seen substantial ETF inflows. Since the launch of spot Bitcoin ETFs in January 2024, net inflows have reached $40.6 billion, with a sharp increase following the election victory of Donald Trump.

These inflows have accounted for around 40% of the variance in weekly Bitcoin price movements.

Similarly, following the election, Ethereum ETF flows have turned positive, with net inflows totaling $3.2 billion since their inception in July.

Mixed signals are coming from on-chain and off-chain metrics, Citi notes. Bitcoin volumes remain high, as do volumes on decentralized exchanges (DEX) compared to centralized exchanges.

The market cap of stablecoins has resumed its strong growth trajectory after a period of stagnation. However, activity from smaller wallet holders has been low, and larger wallet holders appear to be selling. Overall network activity for Ethereum remains volatile, with funding rates at multi-year lows.

Citi strategists also point out that equities remain the primary macro driver for crypto. Meanwhile, the crypto-US dollar correlation turned positive on November 8, a rare occurrence in recent years, though historically short-lived.

Concurrently, the crypto-gold correlation has declined sharply since the US election and remains negative.

Strategists believe concerns over monetary debasement, which could drive stronger correlation between crypto and gold, are not currently significant but will continue monitoring for shifts in sentiment.