According to the latest report from 10x Research, although the crypto market entered the new year with subdued activity, several derivatives indicators are sending strong divergence signals.
The firm notes that market volatility is narrowing, funding rates are gradually rising, and leverage remains elevated—creating a stark contrast with declining trading volume and overall market participation.
01 Market Overview
The current crypto market is experiencing a paradoxical "calm." As observed by 10x Research, the market is entering the new year with cyclical low activity, yet positioning in the derivatives market quietly paints a different picture.
Volatility continues to contract, funding rates are climbing, and leverage remains high. This combination of surface calm and underlying structural tension sets the stage for a potential trend reversal.
Derivatives data reveal a fragile market equilibrium. On one hand, Bitcoin and Ethereum ETFs continue to see persistent outflows, putting pressure on the spot market.
On the other hand, stablecoin issuance has nearly stalled, with only $2 billion in new stablecoins minted over the past 30 days—a figure that ranks in the extremely low 5th percentile.
02 Divergence Signals
The market’s vulnerability stems from a breakdown in coordination among several key data streams. ETF flows, stablecoin activity, and futures positions—three indicators that typically move in sync—are now showing clear divergence.
This disconnect leads to a market that appears "calm on the surface, but turbulent underneath." While open interest in the futures market has declined, remaining traders have shifted toward higher-leverage long positions, driving funding rates into the upper percentiles.
The options market is also sending signals worth noting. With a large batch of options expiring last week, 49% of Bitcoin options notional value and 43% of Ethereum options notional value have exited the market.
Traders seem to be positioning for a period of consolidation, favoring volatility-selling strategies while maintaining moderate exposure to upside risk.
03 Technical Indicator Analysis
From a technical perspective, both Bitcoin and Ethereum show signs that a trend reversal may be approaching, even though both remain in a downward trend for now.
Bitcoin’s Relative Strength Index (RSI) stands at 43%, signaling bullish momentum, while its stochastic indicator is at 30%, indicating bearish sentiment. According to 10x Research’s framework, when RSI drops below 30% and the stochastic indicator falls below 10%, it may signal a bullish reversal.
Currently, Bitcoin is just 4.5% away from triggering a potential trend reversal. In the short term, $88,421 is a critical pivot level, while the main bull-bear transition point is at $98,759.
Ethereum displays similar technical characteristics. Its RSI is at 44%, indicating bullish momentum, while the stochastic indicator is at 23%, showing bearish sentiment. Ethereum is even closer to a reversal, needing just a 5% move.
For Ethereum, close attention should be paid to the $2,991 key level in the short term, with the primary trend reversal point at $3,363.
04 Key Price Levels and Volatility Expectations
Based on current market data and volatility levels, 10x Research forecasts the likely trading ranges for Bitcoin and Ethereum over the next one to two weeks.
For Bitcoin, given its 30-day realized volatility of 38.2%, there is a 68% confidence probability that it will trade between $82,800 and $92,100 in the coming week.
Derivatives market pricing currently suggests traders expect Bitcoin to move by 3.1% over the next week, with the range potentially expanding to about 5.2% in the following week.
Ethereum’s expected volatility is even more pronounced. With a 30-day realized volatility of 61.2%, the 68% confidence interval for the next week is $2,685 to $3,185.
Market expectations are for Ethereum’s price to fluctuate by 4.7% in the coming week, expanding further to nearly 7.9% the week after. This reflects Ethereum’s typically higher volatility compared to Bitcoin.
05 Market Sentiment and Capital Flows
Market sentiment indicators currently appear subdued. Bitcoin’s Fear & Greed Index stands at 30, down from 32% a week ago, signaling a short-term negative outlook.
Ethereum’s Fear & Greed Index is at 36%, down from 47% a week earlier, also pointing to negative short-term sentiment. Historical data shows that when these indices fall below 10%, bullish reversal conditions often begin to form.
On the capital flows front, Bitcoin and Ethereum ETFs continue to experience persistent outflows, putting pressure on crypto assets. Since the Federal Reserve meeting in October, Bitcoin ETFs have seen $5.7 billion in outflows.
Stablecoin activity is also flashing warning signs. Over the past week, stablecoins saw a net decrease of $700 million, ranking in the extremely low 2nd percentile—a metric typically viewed as a negative signal.
Outlook
As of December 29, Bitcoin’s price has rebounded to $89,497, while Ethereum has returned to the key level of $3,011.81. Beneath the market’s seemingly calm surface, options traders are actively selling short-term volatility and adjusting their positions for a potential trend shift.
The subdued Fear & Greed Index stands in sharp contrast to the quietly growing bullish setups in the derivatives market. While most investors are lulled by the surface calm, those watching for divergence signals among ETF flows, stablecoin activity, and futures positions have already caught the early signs of a trend reversal.
A market with high leverage and plummeting trading volume is like a tightly coiled spring, waiting for a catalyst strong enough to push prices past the critical $88,421 or $2,991 levels.
