The bitcoin price has surged approximately 14% this month, marking its best monthly performance in a year. Despite this, the perpetual futures market is displaying a bearish trend, with funding rates currently below zero. However, according to 10x Research's Founder Markus Thielen, this divergence can be attributed to hedging activity by institutions rather than a lack of confidence in bitcoin's performance.
Thielen predicts that the situation is being driven by the increasing participation of sophisticated players in the market. The funding rate, which is used to keep futures prices aligned with spot prices, has been consistently negative in recent weeks. This indicates that shorts are dominating the market, causing perpetual futures to trade at a discount to spot price. The 30-day average funding rate is negative 5%, compared to the historical norm of positive 8%.
Thielen 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 rates, which are not necessarily a sign of a bearish market sentiment.