Bitcoin's recent push towards $80,000 is showing signs of weakness, with low trading volumes and muted activity in the derivatives market raising concerns about the sustainability of the rally. In a recent 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 dropped significantly, with bitcoin's weekly volume coming in 17% below average and ether's volume falling 20%. Furthermore, funding rates, which measure leveraged positioning, remain deeply negative. Thielen noted that 'funding rates fell 6.8% to the 3rd percentile and volumes collapsed 33% to the 4th percentile,' adding 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 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. However, Thielen cautioned 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 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 presents a similar picture, with even weaker participation and a significant drop in volumes. Despite these signals, the setup is not outright bearish, and the risk of forced liquidations on the downside is reduced due to limited leveraged long positions. The key factor that could determine the direction of the market in the days ahead is macroeconomic developments, and for now, the bitcoin rally appears intact, but it may struggle to hold unless broader market conditions provide support.