The recent surge in bitcoin's price towards $80,000 is exhibiting signs of weakness, with low trading volume and subdued derivatives activity sparking concerns about the rally's sustainability. In his weekly report, 10x Research head Markus Thielen highlighted a discrepancy 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 plummeted, with bitcoin's weekly volume 17% below average and ether's volume falling 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 price increase was driven by spot buying or short covering rather than leveraged long conviction, which is a less explosive but more stable form of market participation. Institutional flows have been a positive factor, with bitcoin ETFs recording nine consecutive days of inflows and total April inflows reaching $2.5 billion.
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.
Ethereum's market is also exhibiting similar characteristics, with volumes dropping over 50% and derivatives positioning showing limited appetite for risk. While the setup is not outright bearish, with leveraged long positions limited, the risk of forced liquidations on the downside is reduced, and the 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 being the key factor that could determine direction in the days ahead.