The recent surge in bitcoin's price, with a 14% increase this month, has sparked speculation about its potential to exceed $80,000. However, the perpetual futures market is exhibiting a divergent trend, with a negative funding rate that suggests a lack of confidence in the cryptocurrency's performance. According to 10x Research founder Markus Thielen, this discrepancy can be attributed to institutional hedging activities rather than a broad bearish sentiment.
Thielen, who predicted a 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 investors. The funding rate, which is used to keep futures prices tied to spot prices, has been consistently negative in recent weeks, indicating that shorts are dominating the market. Thielen identified three primary 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 factors contribute to a mechanical risk-management strategy rather than an outright bearish play in bitcoin futures.
As the bitcoin funding rate continues to send an unusual signal, Thielen suggests that something structural is happening in the futures market, which is distinct from a sentiment shift.