The price of bitcoin has surged approximately 14% this month, marking its best monthly performance in a year. Despite this, the perpetual futures market is exhibiting behavior that suggests a bearish outlook, with funding rates currently below zero. However, 10x Research's Founder Markus Thielen attributes this divergence to hedging activities by institutions, rather than a lack of confidence in bitcoin's recent performance. Thielen, who predicted a rally to $125,000 in early 2023, believes that the negative funding rate represents a structural shift in the market driven by the increasing participation of sophisticated players.
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. According to 10x Research, bitcoin's 30-day average funding rate is negative 5%, compared to a historical norm of positive 8%. Thielen identifies three sources of short pressure in the futures market: hedge fund redemptions, institutional trades aimed at capturing yields on publicly traded bitcoin treasury companies, and bitcoin miners pivoting to artificial intelligence. These activities involve shorting bitcoin futures as a hedge, rather than as a bearish bet on the cryptocurrency's price.