The bitcoin price has seen a significant 14% increase this month, marking its best monthly performance in a year. As a result, many anticipate the price will soon exceed $80,000, a level not seen since January.
However, the perpetual futures market is behaving contrary to expectations, with a funding rate that is currently below zero. This divergence has left market participants searching for an explanation. While some view this as a sign of lacking confidence in bitcoin's recent performance, 10x Research's Founder Markus Thielen suggests that the situation is driven by hedging activity from institutions.
According to Thielen, the negative funding rate represents a structural change in the market, resulting from the increasing participation of sophisticated players. The funding rate is a crucial indicator of market sentiment, as it reflects the difference between futures and spot prices. In recent weeks, funding rates have been consistently negative, indicating that shorts are dominating the market and perpetual futures are trading at a discount to spot price.
Thielen identified 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 contribute to the negative funding rate, which is not a reflection of bearish sentiment but rather a result of risk management strategies employed by institutions.