Bitcoin's recent push towards $80,000 is showing signs of weakness, with declining trading volumes and muted activity in the derivatives market raising concerns about the sustainability of the rally. In his weekly report, 10x Research head Markus Thielen highlighted a 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 dropped significantly, with bitcoin's weekly volume coming in 17% below average and ether's volume falling 20%. Funding rates, a measure of leveraged positioning, remain deeply negative, with Thielen stating that 'funding rates fell 6.8% to the 3rd percentile and volumes collapsed 33% to the 4th percentile.' This suggests that the move higher was driven by spot buying or short covering rather than conviction from leveraged long positions.
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 warned 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 is showing similar signs of weakness, with volumes dropping more than 50% and derivatives positioning indicating limited appetite for risk. While the setup is not outright bearish, the risk of forced liquidations on the downside is reduced due to limited leveraged long positions.
Thielen noted that 'near-term risk/reward is asymmetric to the upside if a catalyst emerges,' which may come from outside the crypto space, with macroeconomic developments potentially determining the direction of the market in the days ahead.