The recent surge in bitcoin's price, with a 14% increase this month, has led to speculation about its potential to break the $80,000 barrier. However, the perpetual futures market is indicating a bearish trend, with a negative funding rate. This divergence has sparked debate among market participants, with some interpreting it as a lack of confidence in bitcoin's performance.
According to Markus Thielen, founder of 10x Research, the negative funding rate is actually a result of institutional hedging activity. Thielen, who predicted a bitcoin rally to $125,000 in early 2023, attributes the situation to the increasing participation of sophisticated players in the market.
The funding rate, which is used to keep futures prices in line with spot prices, has been consistently negative in recent weeks. This means that shorts are paying longs, indicating a bearish sentiment. However, Thielen argues that this is not a reflection of market sentiment, but rather a structural change in the market.
He identifies three sources of short pressure in the futures market: hedge fund redemptions, institutional trades, and bitcoin miners pivoting to artificial intelligence. These factors are contributing to the negative funding rate, which is not a bearish bet on bitcoin, but rather a risk management strategy.
Thielen's analysis suggests that the bitcoin market is experiencing a structural shift, driven by the increasing participation of institutional players, rather than a sentiment shift.