The recent 14% monthly surge in bitcoin's price, its best performance in a year, has led to speculation about the cryptocurrency potentially exceeding $80,000. However, the perpetual futures market is displaying a divergent behavior, with funding rates currently below zero. This divergence has sparked debate among market participants, with some interpreting it as a lack of confidence in bitcoin's recent gains and a potential drop. According to Markus Thielen, founder of 10x Research, the negative funding rate is actually driven by hedging activities from institutional players, marking a structural shift in the market.
Thielen, who predicted a bitcoin rally to $125,000 in early 2023, suggests that the increasing participation of sophisticated investors is behind this change. 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 negative 5%, compared to a historical norm of positive 8%, according to 10x Research.
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 miners pivoting to artificial intelligence. These factors contribute to a structural change in the market rather than a sentiment shift, with the negative funding rate reflecting mechanical risk-management trades rather than outright bearish bets on bitcoin futures.