Glossary
Funding rate
The periodic payment between long and short holders of a perpetual futures contract that keeps its price anchored to spot.
Because a perpetual never expires, something else has to stop its price drifting away from the underlying asset. That something is funding. Every funding interval — commonly eight hours, on some venues less — one side pays the other a percentage of their position. When the perpetual trades above spot, longs pay shorts, which discourages new longs and pulls the price down. When it trades below, shorts pay longs.
Funding is not an exchange fee; it passes between traders. But it is a real cost of holding a position. In a strongly bullish market a long can pay well over 0.01% every eight hours, which compounds to more than 10% a year on the position size — far more than any trading fee. A trader who holds perps for weeks should treat funding as the main cost of the trade.
Exchanges differ in interval, cap and how the rate is calculated, and the same asset can carry noticeably different funding on different venues at the same moment. That gap is itself a trading strategy for some, and a reason to check the rate before opening a position on any one venue.
Where this shows up
Frequently asked questions
Who receives the funding payment?
The side of the market the rate is pulling toward. Positive funding means longs pay shorts; negative means shorts pay longs.
Is funding charged if I close before the interval?
No. Funding is exchanged only by positions open at the funding timestamp. Closing a minute before it avoids that payment.
Related terms and pages
Related terms
- Perpetual futures
A leveraged derivative that tracks an asset's price with no expiry date, kept in line with spot through a periodic funding payment between longs and shorts.
- Liquidation
The forced closure of a leveraged position by the exchange when losses have consumed the margin backing it.
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