Bitcoin's recent push towards $80,000 is showing signs of weakness, with low trading volume and muted derivatives activity raising concerns about the rally's sustainability. A report by 10x Research's head, Markus Thielen, highlights a disconnect between the price action and market participation. The report notes that despite a 4.7% increase in bitcoin's price over the past week, the underlying data tells a more cautious story. 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 a 6.8% drop to the 3rd percentile. Thielen attributes the price increase to spot buying or short covering rather than leveraged long conviction.
This distinction is important, as spot buying tends to be more stable 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 warns 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 similar signs of weakness, 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 report concludes that 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 a key factor in determining direction in the days ahead.