The recent surge in Bitcoin's price, approaching $80,000, is showing signs of weakness due to declining trading volumes and muted activity in the derivatives market, raising concerns about the sustainability of the rally. In his weekly report, Markus Thielen, head of 10x Research, highlighted a disconnect between the price movement and the underlying market participation, stating that despite a 4.7% increase in Bitcoin's price over the past week, the accompanying data tells a cautious story.
Trading volumes have dropped significantly, with Bitcoin's weekly volume 17% below average and ether's volume falling 20%. Furthermore, funding rates, a measure of leveraged positioning, remain deeply negative, with Thielen noting that the move higher was driven by spot buying or short covering rather than leveraged long conviction.
This distinction is important, as spot buying tends to be steadier but less explosive than leveraged trades, leaving 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, and Bitcoin dominance climbing to 60%.
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, describing a 'low-funding, low-volume regime that historically reflects hesitation rather than momentum.' 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 paints a similar picture, with even weaker participation, and 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 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 that could determine direction in the days ahead.