The recent 14% monthly increase in bitcoin's price, its best performance in a year, has sparked speculation about its potential to surpass $80,000. However, the perpetual futures market is displaying a contrasting behavior, with funding rates currently below zero.
According to Markus Thielen, Founder of 10x Research, this divergence can be attributed to hedging activity by institutions rather than a lack of confidence in bitcoin's performance. Thielen predicts that the increasing participation of sophisticated players in the market is driving this trend. The funding rate, which is a gauge of market sentiment, has been consistently negative, indicating that shorts are dominating the market. This is in contrast to the historical norm of a positive funding rate.
Thielen identifies three sources of short pressure in the futures market: hedge fund redemptions, institutional trades, and the growing trend of bitcoin miners pivoting to artificial intelligence. These factors are contributing to the negative funding rate, which is not necessarily a bearish signal but rather a result of structural changes in the market.