The bitcoin (BTC) market is exhibiting "aggressive caution" heading into the typically low-volume Easter period amid recent weak price performance, ongoing Iran-led uncertainty, and fresh quantum computing warnings, according to research and brokerage firm K33.

Those catalysts have initiated a new wave in bitcoin defensive positioning, Head of Research Vetle Lunde noted in a new report, with leveraged short bitcoin exchange-traded funds holding 9,012 BTC in exposure — the second-highest level ever following 22% growth in short exposure over the past few days. 

"Such jumps in short exposure typically reflect concentrated bearish positioning, and point toward aggressive caution from traders," Lunde wrote.

Nevertheless, with negative funding rates remaining sticky, Lunde noted that the current environment matches typical bottoming stages as bearish positions overcrowd the market.

"Annualized 30-day average funding rates have now stayed negative for 32 consecutive days, and are two weeks away from surpassing the duration of the negative funding rate regime from November to December 2022," he said.

Easter slowdown

A flurry of public holidays in many parts of the world typically drives a drop in trading volume and volatility, Lunde noted, particularly on the Thursday before Good Friday and the days immediately after.

Many traditional markets are closed on Good Friday and Easter Monday, and while crypto markets trade 24/7, they are not immune to a reduction in liquidity, per the report, especially during European hours.

Comparing bitcoin's seven-day volume in the weeks ending Easter Monday with the average seven-day volume, bitcoin has seen lower trading activity during Easter than the yearly average in every year since 2019, Lunde said.

A similar effect is demonstrated in bitcoin volatility, with lower seven-day measures every Easter compared to the yearly average, Lunde added.