Bitcoin's recent ascent towards $80,000 is showing signs of weakness, with low trading volumes and subdued derivatives activity raising concerns about the rally's sustainability. In his weekly report, 10x Research head Markus Thielen highlighted a disconnect between the price movement and the underlying market participation, stating that 'Bitcoin rallied 4.7% over the past week, yet the accompanying data tells a cautious story beneath the surface.' Trading volumes have declined significantly, with bitcoin's weekly volume 17% below average and ether's volume down 20%.
Furthermore, funding rates, a measure of leveraged positioning, remain deeply negative, with Thielen noting 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. The distinction is crucial, 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, 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.' The 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. Ethereum's market also shows a similar picture, although with even weaker participation, as volumes have dropped more than 50% and derivatives positioning indicates limited appetite for risk. Despite these signals, the setup is not outright bearish, as the limited leveraged long positions reduce the risk of forced liquidations on the downside. Thielen noted that 'near-term risk/reward is asymmetric to the upside if a catalyst emerges.' This catalyst may come from outside the crypto space, with macroeconomic developments potentially determining the direction of the market 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.