Bitcoin's recent push towards $80,000 is displaying signs of weakness, with low trading activity and muted derivatives market participation raising concerns about the sustainability of the rally. In a recent report, 10x Research head Markus Thielen highlighted a discrepancy between the price movement and the underlying market engagement. 'Despite a 4.7% increase in bitcoin's value over the past week, the accompanying data tells a more cautious story,' he noted.
Trading volumes have declined significantly, with bitcoin's weekly volume 17% below average and ether's volume down 20%. Furthermore, funding rates, which measure leveraged positioning, remain deeply negative, indicating a lack of conviction among investors. 'Funding rates dropped 6.8% to the 3rd percentile, and volumes plummeted 33% to the 4th percentile,' Thielen stated, adding that the upward movement was driven by spot buying or short covering rather than leveraged long positions. This distinction is crucial, as spot buying, often linked to institutional demand, 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, resulting in total April inflows of $2.5 billion. Bitcoin's 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, 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. 'The market is anticipating a relatively calm environment,' the report noted, despite sentiment gauges approaching elevated levels. Ethereum presents a similar picture, albeit with even weaker participation, as volumes have dropped over 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. Although the setup is not outright bearish, with leveraged long positions limited, the risk of forced liquidations on the downside is reduced. 'Near-term risk/reward is asymmetric to the upside if a catalyst emerges,' Thielen wrote. This catalyst may originate from outside the crypto space, with macroeconomic developments being 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.