The recent rise of bitcoin towards $80,000 is exhibiting signs of weakness, with low trading volumes and subdued activity in the derivatives market casting doubts on the sustainability of the rally. 10x Research's Markus Thielen highlights a discrepancy between the price movement and the underlying market participation in his weekly report.
'Despite bitcoin's 4.7% increase over the past week, the data tells a more cautious story,' he notes. Trading volumes have declined significantly, with bitcoin's weekly volume 17% below average and ether's volume down 20%. Moreover, funding rates, which measure leveraged positioning, remain deeply negative. Thielen points out that 'funding rates dropped 6.8% to the 3rd percentile, and volumes plummeted 33% to the 4th percentile,' adding that the price increase 'was driven by spot buying or short covering rather than leveraged long conviction.' This distinction is crucial, as spot buying, often linked to institutional demand, 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 aspect, with bitcoin ETFs recording nine consecutive days of inflows, resulting in total April inflows of $2.5 billion. Bitcoin's dominance has also risen to 60%, indicating that capital is concentrating in the largest cryptocurrency rather than spreading across the market. However, Thielen warns 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 anticipating relatively modest price swings over the coming week.
The market is pricing in a relatively calm environment, even as sentiment gauges approach elevated levels. Ethereum presents a similar picture, although 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 leveraged long positions reduce the risk of forced liquidations on the downside. 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 the key factor that could determine direction in the days ahead.