Funding rate explained

Why funding exists

A perpetual never expires, so its price is not forced to meet the spot price on any date. Funding supplies the pressure instead. If the perp trades above spot, a positive rate makes holding a long more expensive and holding a short more rewarding, which pushes the price down. A negative rate does the reverse.

How the payment is calculated

Funding payment = position value × funding rate. A $10,000 position at a rate of 0.01% pays or receives $1 at that interval.

Many contracts settle funding every eight hours, but the interval varies by exchange and by contract, and some shorten it when the market is stretched. You pay or receive funding only if you hold a position at the moment it is settled.

What it adds up to

A rate that looks negligible per interval compounds over a long hold. At 0.01% every eight hours, a position pays about 0.03% a day, or roughly 0.9% a month, on its full value. On a 10× position that is about 9% of the margin per month. Rates are not constant: they can be many times higher during strong trends, and they can flip sign.

Funding and fees are different things

Trading fees go to the exchange and are charged per fill. Funding goes to other traders and is charged per interval. An exchange’s fee schedule tells you nothing about its funding rates, which are set by the market on each contract.

Where to go next

Common questions