The recent 14% surge in bitcoin's price this month, its best performance in a year, has sparked expectations of a potential push past $80,000. However, the perpetual futures market is telling a different story, with funding rates currently in negative territory. This divergence has left market participants searching for answers. Markus Thielen, Founder of 10x Research, attributes the negative funding rate to hedging activity by institutions, rather than a lack of confidence in bitcoin's performance.
Thielen, who predicted a rally to $125,000 in early 2023, believes the situation is driven by structural changes in the market, brought on by the increasing participation of sophisticated players. The funding rate, which acts as a real-time gauge of market sentiment, has been consistently negative in recent weeks, with bitcoin's 30-day average funding rate at negative 5%, compared to the historical norm of positive 8%.
Thielen identifies three 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 mechanical risk-management trades, rather than outright bearish bets, are driving the negative funding rate, according to Thielen.