Despite Bitcoin’s price rally, perpetual futures indicators may appear bearish, but Decryptnews analyst clarifies they are not.

Research firm 10x indicates that negative funding rates are a result of institutional hedging strategies rather than a widespread bearish sentiment.

Key takeaways:

• Bitcoin’s perpetual futures are experiencing negative funding rates even as the asset surges 14% this month, marking its best monthly performance since April 2025.
• Decryptnews reports that 10x attributes these negative funding rates to institutional hedging, not a bearish trend, with hedge funds shorting futures to balance other positions.

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Bitcoin

However, the perpetual futures market, which usually mirrors spot price movements, is acting contrary to expectations. Specifically, the funding rate — which is positive when futures are positioned for a price increase and negative when positioned for a decrease — is currently below zero.

This divergence has left market participants seeking an explanation. While many interpret this as a sign of trader confidence waning in Bitcoin’s recent performance and positioning for a drop, there is another explanation.

According to 10x Research’s Founder Markus Thielen, who predicted a rally to $125,000 in early 2023, the situation is actually driven by hedging activity from institutions. Rather than retail traders dictating trends, the negative funding rate represents a structural market shift due to the increasing involvement of sophisticated players.

Why the funding rate matters

Perpetual futures are contracts that track Bitcoin’s price without expiring, unlike standard futures listed on exchanges like the CME. To keep futures prices aligned with spot prices, exchanges charge a periodic fee known as the funding rate.

When futures prices are higher than spot, indicating buyers are more aggressive in the futures market, longs (investors holding futures) pay shorts (those who sold contracts expecting to buy them back cheaper). In this scenario, the funding rate is positive.

When futures trade below spot, it signals short pressure dragging futures down relative to actual Bitcoin, shorts pay longs, and the rate becomes negative.

The funding-rate mechanism serves as a real-time gauge of market sentiment.

In recent weeks, funding rates have been consistently negative, meaning shorts are in control and perpetual futures have traded at a discount to the spot price.

Bitcoin’s 30-day average funding rate is negative 5%, compared with the historical norm of positive 8%, according to 10x Research. This represents a 13 percentage point discount to baseline, and it is becoming more negative even as the price climbs.

«The Bitcoin funding rate is sending an unusual signal,» Thielen wrote in a note to clients on Saturday. «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.»

Structural pressures

Thielen identified three sources for the short pressure in the futures market.

The first is hedge fund redemptions. Crypto hedge funds have underperformed Bitcoin by 140% over five years, and investors have been withdrawing capital. This process takes time, and during redemption notice periods, funds have been shorting Bitcoin futures to neutralize their price exposure while waiting for their capital to return to their bank or trading accounts. These are mechanical risk-management trades, not bearish bets, Thielen said.

The second involves two separate institutional trades, both of which require shorting Bitcoin futures as a hedge. One bets that shares of Strategy (MSTR), the largest publicly traded Bitcoin treasury company, will outperform Bitcoin directly while shorting futures. The other aims to capture the 11% yield on MSTR preferred shares (STRC) while shorting futures to eliminate crypto price volatility risk. Strategy raised $3.5 billion in April alone, scaling both trades simultaneously.

The third is the growing trend of Bitcoin miners to pivot to artificial intelligence. Miners like Hut 8, up 48% since April 6, are reducing their Bitcoin production and adding to their support for AI computing. Funds buying these stocks are simultaneously shorting Bitcoin futures to remove crypto correlation from the trade. Again, this is risk management, not an outright bearish play in Bitcoin futures.