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 the disparity between the price movement and the underlying market participation, stating that 'Bitcoin's 4.7% gain over the past week 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, which measure 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 recent price increase was driven by spot buying or short covering rather than a conviction-driven, leveraged long position.
The 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 demand has been a positive factor, with bitcoin ETFs recording nine consecutive days of inflows, resulting in total April inflows of $2.5 billion. Additionally, bitcoin's dominance has 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 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 pricing in a relatively calm environment,' the report noted, even as sentiment gauges approach elevated levels. Ethereum presents a similar picture, with even weaker participation, as volumes have dropped more than 50% and derivatives positioning shows limited appetite for risk.
Despite these signals, the setup is not outright bearish, as the limited number of leveraged long positions reduces the risk of forced liquidations on the downside. 'Near-term risk/reward is asymmetric to the upside if a catalyst emerges,' Thielen wrote. This catalyst may come from outside the crypto space, with the report highlighting macroeconomic developments as 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.