10x Research Warning: Will BTC and ETH experience a key trend reversal in January?

According to the latest report by 10x Research, although the crypto market has entered the new year with subdued activity, several derivatives indicators have issued strong divergence signals.

The organization points out that market volatility is narrowing, funding rates are gradually rising, and leverage remains high, forming a stark contrast with the continuously declining trading volume and market participation.

01 Market Status

The current crypto market presents a paradoxical "calm." According to 10x Research observations, the market is entering the new year with cyclical low activity, but the positioning in the derivatives market is quietly painting a different picture.

Volatility continues to narrow, funding rates are gradually increasing, and market leverage remains elevated. This combination of surface calmness and internal structural tension lays the groundwork for a potential trend reversal.

Derivatives data reveal the fragile balance of the market. On one hand, ETF funds for Bitcoin and Ethereum continue to show outflows, putting pressure on the spot market.

On the other hand, stablecoin minting activity has almost come to a halt, with only $2 billion worth of new stablecoins minted in the past 30 days, placing this indicator in the extremely low 5th percentile.

02 Divergence Signals

The market's fragility stems from a loss of coordination among several key data flows. The three typically synchronized indicators—ETF fund flows, stablecoin trading activity, and futures positions—are now showing clear divergence.

This divergence causes the market to be "calm on the surface, with undercurrents surging." Although open interest in futures has decreased somewhat, remaining traders are shifting toward higher leverage long positions, pushing funding rates to higher percentiles.

Options market activity also sends noteworthy signals. After a large number of options expired 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 recent consolidation, favoring strategies that sell volatility while maintaining moderate exposure to upward risk.

03 Technical Indicator Analysis

From a technical analysis perspective, both Bitcoin and Ethereum show signs that a trend reversal may be imminent, although they are still in a downtrend.

Bitcoin's Relative Strength Index (RSI) is at 43%, signaling a bullish signal; while its stochastic indicator is at 30%, indicating a bearish signal. According to 10x Research's framework, when RSI falls below 30% and the stochastic indicator below 10%, it may suggest a reversal of the upward trend.

Bitcoin is only 4.5% away from triggering a trend reversal. In the short term, $88,421 is a key support/resistance level, while the main bull-bear transition price is at $98,759.

Ethereum also exhibits similar technical features. Its RSI is at 44%, indicating a bullish signal; while its stochastic indicator is at 23%, indicating a bearish signal. Ethereum is closer to triggering a trend reversal, only 5% away.

For Ethereum, close attention should be paid to the key level of $2,991 in the short term, with the main trend change observation point at $3,363.

04 Key Price Levels and Volatility Expectations

Based on current market data and volatility levels, 10x Research forecasts possible trading ranges for Bitcoin and Ethereum over the next one to two weeks.

For Bitcoin, considering its 38.2% 30-day realized volatility, there is a 68% confidence probability that it will trade within the $82,800 to $92,100 range in the next week.

Derivatives market pricing currently indicates that traders expect Bitcoin to have a 3.1% price volatility over the next week, which could expand to about 5.2% in the following week.

Ethereum's expected volatility is more pronounced. Using its 61.2% 30-day realized volatility, the 68% confidence interval for the next week is $2,685 to $3,185.

Market expectations suggest Ethereum's price volatility over the next week will reach 4.7%, further expanding to nearly 7.9% in the following week. This reflects Ethereum's generally higher volatility compared to Bitcoin.

05 Market Sentiment and Fund Flows

Market sentiment indicators currently appear subdued. Bitcoin's greed and fear index is at 30, down from 32% a week ago, indicating a short-term negative market sentiment.

Ethereum's greed and fear index is at 36%, also down from 47% a week ago, similarly pointing to negative short-term market sentiment. Historical data shows that when these indices fall below 10%, bullish reversals are often forming.

In terms of fund flows, ETF outflows for Bitcoin and Ethereum continue, exerting pressure on crypto assets. Since the October Federal Reserve meeting, Bitcoin ETFs have experienced $5.7 billion in outflows.

Stablecoin activity also shows worrying signals. In the past week, stablecoins experienced a net reduction of $700 million, placing this indicator in the extremely low 2nd percentile, generally viewed as a negative signal.

Future Outlook

As of December 29, Bitcoin's price has rebounded to $89,497, and Ethereum has returned to the key level of $3,011.81. Beneath the seemingly calm surface, options traders are heavily selling short-term volatility, adjusting positions for a possible trend reversal.

The subdued greed and fear indices contrast sharply with the quietly growing bullish positioning in derivatives markets. While most investors are deceived by the surface calm, those paying attention to divergence signals among ETF fund flows, stablecoin activity, and futures positions have already heard the first signs of a trend change.

Markets with high leverage and sharply reduced trading volume are like a tightly wound spring, waiting only for a catalyst to push prices beyond the key levels of $88,421 or $2,991.