The bitcoin price has surged approximately 14% this month, marking its best monthly gain in a year. Despite this, the perpetual futures market is exhibiting a divergence from the spot price action, with funding rates currently in negative territory. However, according to 10x Research Founder Markus Thielen, this disparity is not a sign of waning confidence in bitcoin's recent rally, but rather a result of hedging activity by institutional players.
Thielen, who predicted a bitcoin price of $125,000 in early 2023, believes the negative funding rate represents a structural shift in the market driven by the increasing participation of sophisticated investors. The funding rate, which is used to keep futures prices aligned with spot prices, has been consistently negative in recent weeks, indicating that shorts are dominating the market. Bitcoin's 30-day average funding rate is currently negative 5%, compared to a historical norm of positive 8%, according to 10x Research.
Thielen identifies three key sources of short pressure in the futures market: hedge fund redemptions, institutional trades involving shorting bitcoin futures as a hedge, and the growing trend of bitcoin miners pivoting to artificial intelligence. These factors, he argues, are driving the negative funding rate, rather than a broad bearish sentiment towards bitcoin.