Bitcoin's recent push towards $80,000 is showing signs of weakness, with low trading volumes and reduced activity in the derivatives market raising concerns about the sustainability of the rally. In a recent report, 10x Research head Markus Thielen highlighted the disconnect between the price movement and the underlying market participation, noting that 'Bitcoin rallied 4.7% over the past week, yet the accompanying data tells a cautious story beneath the surface.' Trading volumes have decreased significantly, with bitcoin's weekly volume 17% below average and ether's volume down 20%. At the same time, funding rates, which measure leveraged positioning, remain deeply negative. Thielen stated that 'funding rates fell 6.8% to the 3rd percentile and volumes collapsed 33% to the 4th percentile,' adding that the upward move 'was driven by spot buying or short covering rather than leveraged long conviction.' This distinction is important, as spot buying, often linked to institutional demand, tends to be more stable but less explosive than leveraged trades.
It also leaves the market without the kind of momentum typically seen in strong bull runs. Institutional flows have been a positive factor, with bitcoin ETFs recording nine consecutive days of inflows, resulting in total April inflows of $2.5 billion. Bitcoin dominance has also increased to 60%, indicating that capital is concentrating in the largest cryptocurrency rather than spreading across the market.
However, Thielen warned that the rally's structure remains fragile, stating that 'the market has shifted from a more actively traded environment to one where participants are largely on the sidelines.' Options markets reinforce 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. 'The market is pricing in a relatively calm environment,' the report noted, even as sentiment gauges approach elevated levels. Ethereum presents a similar picture, although with even weaker participation.
Volumes have dropped more than 50%, and derivatives positioning shows limited appetite for risk. 'The volume implosion points to a market where conviction remains low, and participants are largely disengaged,' Thielen said.
Despite these signals, the setup is not outright bearish, as the limited number of leveraged long positions reduces the risk of forced liquidations on the downside. 'Near-term risk/reward is asymmetric to the upside if a catalyst emerges,' Thielen wrote.
This catalyst may come from outside the crypto space, with the report highlighting macroeconomic developments as the key factor that could determine direction in the days ahead. For now, bitcoin's rally appears intact, but without stronger participation, it may struggle to hold unless broader market conditions provide support.