Analytics firm Glassnode has noted that Bitcoin funding rates have risen across major exchanges, though not to extreme levels. In a recent post on X, Glassnode discussed the latest trend in Bitcoin funding rates for perpetual futures markets. The funding rate is an indicator that measures periodic fees exchanged between traders on a derivatives platform.
When the funding rate is positive, it means long-position holders are paying a premium to short holders, reflecting a dominant bullish sentiment. Conversely, a negative funding rate suggests shorts outweigh longs, indicating bearish sentiment among traders.
Glassnode shared a chart showing the 7-day moving average of Bitcoin funding rates across major exchanges over the past two years. The chart reveals that funding rates have recently increased, signaling that investors are opening new bullish positions. The average funding rate dropped to 0% in November as Bitcoin’s price fell, but gradually recovered to 0.005% as the asset entered a consolidation phase and investors built long positions.
However, in the last 24 hours, the average funding rate has pulled back to 0.003%, suggesting some investors have closed long positions after the recent rally or opened short positions to bet against further gains.
Historically, significant Bitcoin rallies have often coincided with notably positive funding rates across exchanges. Glassnode points out that a threshold of around 0.001% has typically been relevant. Since the current average funding rate remains below this level, the firm notes that “current conditions remain supportive but not yet decisive.”
Bitcoin recently regained bullish momentum, climbing as high as $94,700 before retreating to around $92,100. Other cryptocurrencies have also experienced volatility, leading to over $500 million in liquidations on derivatives exchanges in the past day, according to CoinGlass data. Of that total, approximately $146 million involved Bitcoin-related positions.
Frequently Asked Questions
FAQs on Bitcoin Funding Rates Market Signals
Beginner Questions
1 What are Bitcoin funding rates
Funding rates are periodic payments made between traders in perpetual futures contracts They are designed to keep the contracts price close to the underlying Bitcoin spot price A positive rate means long traders pay shorts a negative rate means shorts pay longs
2 What does it mean that funding rates have improved
In this context improved typically means they have moved from being extremely high to more moderate or even neutral levels Extremely high positive funding rates are often a sign of excessive bullish leverage and can precede a market correction
3 Why are funding rates important
They are a key gauge of market sentiment and leverage High positive rates suggest traders are overly optimistic and using a lot of leverage to bet on higher prices which can be a warning sign Conversely deeply negative rates can signal extreme fear
4 What is Glassnode
Glassnode is a leading blockchain data and intelligence platform It provides onchain metrics like funding rates to help analysts understand market behavior and investor sentiment
Intermediate Advanced Questions
5 If funding rates have improved why is the signal still unclear
While improved funding rates reduce the immediate risk of a long squeeze other factorslike macroeconomic news Bitcoin ETF flows or onchain holder behaviorcan still dictate price direction The market might be in a state of equilibrium or waiting for a new catalyst
6 What other metrics should I look at alongside funding rates
For a clearer picture combine funding rates with
Open Interest Total value of open futures contracts Rising OI with high funding can be riskier
Liquidations Clusters of large liquidation levels can act as price magnets
Spot Market Flows Are ETFs buying or selling Is Bitcoin moving off exchanges
Onchain Indicators Like the MVRV ZScore or SOPR which measure holder profitability
7 Can negative funding rates be a good buying signal
Historically sustained periods of deeply negative funding rates have sometimes coincided with market capitulation and potential price bottoms as excessive pessimism gets flushed out However its not a timing tool and should be confirmed with other data