Futures & Derivatives

Funding rate explained

Funding rate (funding fee)

Quick definition: Funding rate is a periodic fee that Longs and Shorts pay each other on perpetual contracts, keeping the contract price close to the spot market price.

Perpetual contracts have no expiry date, so exchanges use funding to pull the contract price toward the spot price. Funding is usually charged every 8 hours (every 4 hours or 1 hour for some coins).

When funding is positive, Longs pay Shorts: more of the crowd is betting on a rise. When funding is negative, Shorts pay Longs: the crowd is betting on a drop.

Extremely high or low funding shows that one side is unusually crowded. In that situation, even a small move against them can trigger a cascade of liquidations on the crowded side.

💡 Example

You are Long 10,000 USDT of BTC with funding at +0.01% every 8 hours. Each period you pay 10,000 × 0.01% = 1 USDT to the Shorts. If funding is +0.1%, you pay 10 USDT per period, or 30 USDT a day.

📊 View today's funding rates by coin →

Related terms

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Educational content for reference only, not financial advice. Leveraged trading carries the risk of losing your entire capital.