How’s the Market Doing?
This week, Bitcoin came back above $80,000, up 35% from its February low. And for the first time in months, serious analysts are saying crypto winter is over out loud.
Bitcoin hit $82,305 last Wednesday, its highest level since January 31st. As of when this letter was written, it’s hovering around $80,000, with Ethereum at $2,312 and Solana holding around $93.
Words on the street have it that the current crypto bear market is likely over. According to Tom Lee, chairman of Bitmine, this fresh cycle is driven by the fact that tokenization and artificial intelligence-powered financial services is beginning to take shape. If Bitcoin continues to rise and closes May above $76,000. That would be three consecutive months of gains, which historically marks the end of every Bitcoin bear cycle.
What else is driving the current market?
The futures market just quietly changed sides
Here is the signal that does not get a lot of airtime, but probably should.
For most of the last three months, funding rates in the Bitcoin futures market were negative. In simple terms: a lot of traders were paying small recurring fees to bet against Bitcoin, expecting the price to fall. Much of that activity came from hedge funds running a strategy where they bought Bitcoin (or spot Bitcoin ETFs) and simultaneously sold futures contracts, which created constant downward pressure even when prices were rising.
Last week, that flipped. Funding rates have moved back to neutral or even slightly positive. The traders who were betting against Bitcoin have largely closed out their positions, which removes a major source of selling pressure that was quietly capping the market for months.
What this opens up is a possible short squeeze. If Bitcoin keeps climbing, the traders who are still betting against it may be forced to buy back their contracts to limit their losses — which would push prices even higher. Analysts at Bitfinex put it this way: “the shorts paying for the privilege are no longer present at scale. Either funding migrates back negative as new ETF capital recreates the trade, or the squeeze has further to run.” In plain english, the structural pressure that was holding Bitcoin down for months has just been lifted.
