What Is the Funding Rate in Crypto Futures?
Open a perpetual futures position and hold it for a while, and you will notice small amounts added to or subtracted from your balance every few hours. That is the funding rate, and it confuses almost every beginner. The good news: it is simple once you see why it exists.
What the funding rate is
The funding rate is a small periodic payment exchanged directly between traders — longs and shorts — usually every 8 hours. The exchange does not keep it; it simply moves money from one side to the other. It is typically a tiny percentage (often around 0.01% per period), but it can rise when the market is heavily one-sided.
Why perpetuals need it
A perpetual futures contract has no expiry date, so there is nothing forcing its price to match the real (spot) price of the coin. The funding rate is the mechanism that keeps them close. When the futures price drifts above spot, funding turns positive to discourage longs; when it drifts below, funding turns negative to discourage shorts. It is a gentle financial nudge that keeps the contract anchored to reality.
Who pays whom
- Positive funding (the common case in a bullish market): longs pay shorts. If you are long, it costs you a little; if you are short, you receive a little.
- Negative funding: shorts pay longs. If you are short, it costs you; if you are long, you receive.
You only pay or receive if you are holding a position at the funding timestamp. If you open and close between timestamps, you pay no funding at all. Our funding rate calculator shows the exact cost for a given position and rate.
When it matters for beginners
For a quick trade lasting minutes or hours, funding is usually negligible. It starts to matter when you hold a leveraged position for days — because funding is charged on the full position size (which leverage makes large), the small percentage adds up. If you are holding a leveraged long through a strong bull run, positive funding can quietly eat into your profit. It is one of the costs covered in crypto trading fees explained, and worth checking before you place your first futures trade.
