Bitcoin's recent push towards $80,000 is showing signs of weakness, with low trading volumes and muted activity in the derivatives market raising concerns about the durability of the rally. A report by 10x Research head Markus Thielen highlights a disconnect between the price action and underlying market participation, with bitcoin's 4.7% gain over the past week being accompanied by a cautious narrative beneath the surface.
Trading volumes have dropped significantly, with bitcoin's weekly volume 17% below average and ether's volume falling 20%. Funding rates, a measure of leveraged positioning, remain deeply negative, with Thielen noting that the move higher was driven by spot buying or short covering rather than leveraged long conviction. This distinction is important, as spot buying tends to be steadier but less explosive than leveraged trades, leaving the market without the momentum typically seen in strong bull runs.
Institutional flows have been a positive factor, with bitcoin ETFs recording nine consecutive days of inflows and total April inflows reaching $2.5 billion. However, Thielen cautions that the rally's structure remains fragile, with the market shifting from an actively traded environment to one where participants are largely on the sidelines. The options market reinforces this view, with volatility falling into the lower quartile of its historical range and traders pricing in relatively modest price swings over the coming week.
Ethereum's market also shows a similar picture, with volumes dropping more than 50% and derivatives positioning indicating limited appetite for risk. Despite these signals, the setup is not outright bearish, with the risk of forced liquidations on the downside reduced due to limited leveraged long positions.
The near-term risk/reward is asymmetric to the upside if a catalyst emerges, which may come from outside the crypto space, with macroeconomic developments being the key factor that could determine direction in the days ahead.