The recent 14% monthly rally of bitcoin to $78,206.79, its best performance in a year, has sparked expectations of a potential push past $80,000. However, the perpetual futures market, typically aligned with spot price movements, is exhibiting a divergent behavior, with funding rates currently below zero.
This discrepancy has prompted market participants to seek explanations. While some interpret this as a lack of confidence in bitcoin's recent gains, 10x Research's Founder Markus Thielen suggests the situation is driven by institutional hedging activities. The negative funding rate, Thielen explains, represents a structural shift in the market due to increased participation from sophisticated players. The funding rate mechanism acts as a real-time gauge of market sentiment, and its recent negative trend, with a 30-day average of -5% compared to the historical norm of +8%, indicates that shorts are currently dominating the market.
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, with funds buying these stocks simultaneously shorting bitcoin futures to remove crypto correlation. These activities, according to Thielen, are driven by risk management rather than outright bearish bets on bitcoin futures.