Funding rates

A funding rate is a small periodic payment exchanged between traders holding long and short perpetual futures positions. When the rate is positive, longs pay shorts; when it is negative, shorts pay longs.

Why funding exists

A perpetual contract never expires, so something must stop its price drifting far from the spot market. Funding does that job. If the perp trades above spot, the rate tends to turn positive, which makes holding longs more expensive and encourages shorts. If the perp trades below spot, the rate tends to go negative, rewarding longs.

Funding is paid directly between traders, not to the exchange. Many exchanges settle it at fixed intervals, commonly every eight hours, though some use different schedules. You only pay or receive it if you hold a position at the settlement moment.

Who pays whom

A worked example

Funding is calculated on the full position value, not just your margin.

Now suppose you used 5x leverage, so your margin is 2,000 USDT. That 90 USDT is 4.5% of your margin in a month, even if the price does not move at all. In excited markets, funding rates can climb well above that illustrative figure, making long positions expensive to hold.

If the rate were −0.01% instead, the same long position would receive 1 USDT per interval, while shorts would pay.

Practical points

• The exchange usually shows the current or predicted rate and a countdown to the next settlement.
• Rates change with market sentiment, so a cheap position today can become costly tomorrow.
• Funding adds to, or offsets, your trading fees.

Key takeaways

• Positive funding means longs pay shorts; negative means shorts pay longs.
• Funding is charged on the full position value at each settlement time.
• A 10,000 USDT position at 0.01% per interval pays 1 USDT each time.
• Over long holding periods, funding can become a significant cost.