Bitcoin funding rates in 2021 experienced unprecedented volatility, reflecting the cryptocurrency's dramatic price movements and shifting market sentiment throughout the year. The average 8-hour funding rates ranged from highly negative values to record-breaking positive peaks, showcasing the intense speculative activity in the Bitcoin futures market.
The first quarter of 2021 saw Bitcoin funding rates reach extraordinary levels, reflecting the market's bullish frenzy. January started with an average rate of 0.06746%, but individual daily rates were far more extreme. On January 8th, the rate peaked at an astonishing 0.18416%, indicating an overwhelmingly long-biased market as Bitcoin's price surged past $40,000 for the first time.
February witnessed even higher average rates, reaching 0.09992%. The month saw a sustained period of extremely high rates, with February 9th hitting 0.19566%, the highest daily average of the year. This coincided with Tesla's announcement of a $1.5 billion Bitcoin investment, pushing the price above $50,000.
March showed a cooling of sentiment but still maintained high positive rates with an average of 0.04336%. The month ended strongly with rates reaching 0.09750% on March 31st as Bitcoin approached $60,000.
The second quarter began with continued optimism. April's average rate was 0.06005%, with several days seeing rates above 0.10%. This bullish sentiment aligned with Bitcoin's push to its all-time high near $65,000 mid-month.
May started strong but experienced a dramatic shift. The average rate for the month was 0.02577%, but this masks the extreme volatility. On May 19th, as Bitcoin's price crashed below $40,000, the funding rate plummeted to -0.02745%, the lowest point of the year so far, indicating a rapid shift to short bias.
June marked a significant cooldown with the average rate dropping to a mere 0.00022%. The month saw several days of negative rates, particularly on June 9th at -0.02822%, reflecting the market's uncertainty as Bitcoin struggled to maintain support above $30,000.
The third quarter began with negative sentiment. July was the only month of the year with a negative average rate at -0.00264%. The month hit its lowest point on July 25th with a rate of -0.04876%, coinciding with Bitcoin's price drop below $30,000.
August showed signs of recovery with the average rate rising to 0.01388%. The month ended on a high note, with the rate reaching 0.05048% on August 31st as Bitcoin reclaimed the $47,000 level.
September maintained a positive but modest average rate of 0.00909%. The month saw less volatility compared to previous periods, with rates generally fluctuating between -0.01% and 0.04%, mirroring Bitcoin's consolidation around $45,000.
The final quarter of 2021 witnessed a resurgence in bullish sentiment. October started strongly with an average rate of 0.02749%. The month saw several spikes in funding rates, notably on October 21st at 0.09613%, coinciding with Bitcoin's new all-time high above $66,000.
November maintained the positive momentum with an average rate of 0.02836%. While not as extreme as earlier in the year, the month still saw significant daily fluctuations, with rates often exceeding 0.05% as Bitcoin held strong above $60,000 for much of the month.
December showed a moderation in funding rates, with the average dropping to 0.01032%. This cooling aligned with Bitcoin's price correction below $50,000. The month ended on a relatively calm note, with rates consistently around 0.01% in the final week.
The year 2021 demonstrated the extreme nature of Bitcoin funding rates during a bull market cycle. From the euphoric highs in Q1 to the dramatic crashes in Q2, and the gradual recovery in the latter half of the year, funding rates provided a clear reflection of the market's roller-coaster journey. These fluctuations coincided with Bitcoin's rise from around $30,000 at the start of the year to nearly $70,000 at its peak, before settling around $46,000 by year-end.
