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Bitcoin funding rates have had an interesting year in 2021. While mostly following the price of the digital asset, there have been periods of highs, lows, and sometimes flat funding rates. It has also been a metric that has helped traders to figure out how institutional investors are moving money in bitcoin, hence the rise and drop in it has been significant at various times.
In this report, we take a look at the funding rates throughout the year. This will include times when funding rates flipped to the negative, as well as back into the positive, all of this in accordance with the price of bitcoin.
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First Half Of The Year Stayed Positive
Bitcoin funding rates definitely had a better first half of the year compared to the second half. The differences between these two portions of the year are quite stark given how good the funding rates were at the start and how it seemed to have fallen off a cliff heading towards the end of the year.
The first quarter of 2021 was undoubtedly the peak period for funding rates. In line with the market sentiment moving up into the extreme greed territory, funding rates had continued to surge. Crypto exchanges such as Binance and ByBit saw bitcoin funding rates soar above 0.1%, which corresponded with an annualized interest rate that was higher than 100%.
Funding rates remain flat | Source: Arcane Research
This would continue into Q2 as bitcoin’s value continued to go up, but in May, funding rates had crashed. During the summer, funding rates then moved completely into the negative when the market crash happened, as investors remained fearful of the market.
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As the sell-offs subsided in the Fall, funding rates balanced out once again. However, there was not much swing in either direction as traders figured out the best way to gain yield in the market. Basically, traders realized that it was better to be opposed to the perpetual traders and this was an efficient way to gain yield in the market, according to a report from Arcane Research.
How Bitcoin Funding Rates Are Doing
Bitcoin funding rates have mostly settled into a steady interchange of positive and negative flows. It took another nosedive during the December 4th crash but has since recovered. Although it is now back into the positive, it is still a long way from its February/March highs. However, as Bitcoinist reported earlier, this is a positive trend that could suggest a fast recovery.
BTC crashes down to $46,875 | Source: BTCUSD on TradingView.com
After the highs and the lows that have rocked the funding rates, it is now at what could be regarded as flat. Movement either up or down is not significant either way but continues to maintain above the early December lows.
Featured image from Coin Guides, charts from Arcane Research and TradingView.com