The recent 14% monthly surge in bitcoin's price to $76,300.06, its best performance in a year, has sparked speculation about a potential push past $80,000. However, the perpetual futures market is displaying a bearish outlook, with funding rates currently below zero. This divergence has led to confusion among market participants, with some interpreting it as a lack of confidence in bitcoin's recent gains. Nevertheless, 10x Research's Founder Markus Thielen suggests that the negative funding rate is actually a result of structural hedging by institutions, rather than a bearish play.
Thielen, who predicted a bitcoin rally to $125,000 in early 2023, points out that the increasing participation of sophisticated players in the market is driving this trend. 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 involving shorting bitcoin futures as a hedge, and bitcoin miners pivoting to artificial intelligence.
These mechanical risk-management trades are not bearish bets, but rather a sign of structural changes in the market. As the price of bitcoin continues to climb, the negative funding rate is becoming increasingly pronounced, with Thielen noting that 'something structural is happening in the futures market, not a sentiment shift'.