The price of bitcoin has seen a significant increase of approximately 14% this month, marking its best monthly performance in a year. Despite this, the perpetual futures market is exhibiting behavior that suggests a lack of confidence in the cryptocurrency's recent performance, with funding rates currently below zero. However, Markus Thielen, Founder of 10x Research, attributes this divergence to hedging activity by institutions rather than a bearish outlook. Thielen, who predicted a bitcoin price rally to $125,000 in early 2023, believes that the negative funding rate is a result of structural changes in the market driven by the increasing participation of sophisticated players.
The funding rate, which is a gauge of market sentiment, has been consistently negative in recent weeks, indicating that shorts are dominating the market and perpetual futures are trading at a discount to the spot price. According to 10x Research, the 30-day average funding rate is negative 5%, compared to a historical norm of positive 8%, representing a 13 percentage point discount to the baseline. Thielen identifies three sources of short pressure in the futures market: hedge fund redemptions, institutional trades aimed at capturing the yield on MSTR preferred shares, and bitcoin miners pivoting to artificial intelligence. These factors are contributing to the negative funding rate, which is a result of mechanical risk-management trades rather than bearish bets on bitcoin.