Bitcoin (BTC) has seen a 14% increase this month, marking its best monthly performance in over a year, and is on track to surpass $80,000—a level it hasn’t reached since January. However, the perpetual futures market, usually aligned with spot price movements, indicates otherwise due to a negative funding rate, which suggests an expectation of falling prices.
Market participants are puzzled by this divergence, interpreting it as skepticism over Bitcoin’s recent gains and anticipating a decline. Yet, Markus Thielen from 10x Research offers another perspective: the negative funding rate reflects hedging activities by institutional players rather than retail traders’ bearish sentiment.
Perpetual futures track Bitcoin’s price indefinitely, unlike traditional exchange-listed futures. To align futures prices with spot prices, exchanges impose a periodic fee known as the funding rate. When futures are priced higher than spot, longs pay shorts, resulting in a positive funding rate, and vice versa for negative rates.
Recently, funding rates have been persistently negative, indicating dominance by shorts and trading at a discount to spot price. The 30-day average funding rate is minus 5%, deviating from the historical norm of plus 8%—a 13 percentage point shift amidst Bitcoin’s climb.
“The Bitcoin funding rate is sending an unusual signal,” Thielen noted in a client update. “At minus 5% on a 30-day average against a historical norm of plus 8%, and turning more negative even as Bitcoin rallies 15% and the options skew recovers, something structural is happening in the futures market, not a sentiment shift.”
Thielen identifies three sources for this short pressure: hedge fund redemptions, institutional trades requiring shorts as hedges, and bitcoin miners’ pivot to AI. Hedge funds underperforming Bitcoin have seen outflows, prompting mechanical risk-management shorts during redemption periods. Institutional strategies include betting on Strategy (MSTR) shares while shorting futures or capturing MSTR preferred shares’ yield with similar hedging. Moreover, miners like Hut 8, which has risen 48% since April 6, are reducing Bitcoin production in favor of AI investments, leading to concurrent shorts in bitcoin futures as a risk management strategy rather than a bearish outlook.