What Is the Funding Rate in Crypto Futures?

The funding rate is a small payment that long and short traders exchange directly with each other, on a recurring schedule, to keep a perpetual future's price tied to the spot market. It isn't a fee to the exchange — it's a transfer between the two sides of the trade.

Why perpetual futures need a funding rate

A dated future has an expiry date that forces its price to converge with spot. A perpetual future never expires, so it needs a different anchor. Funding is that anchor: it makes holding the crowded side of the market cost money, which nudges the contract price back toward spot.

If lots of traders are long and the perp drifts above spot, funding turns positive so that being long costs something — discouraging more longs and pulling the price down. The reverse happens when the perp trades below spot. (For the contract itself, see Perpetual futures explained.)

When you pay and when you get paid

• Positive funding → longs pay shorts. The perp is trading above spot; the market is leaning long.
• Negative funding → shorts pay longs. The perp is below spot; the market is leaning short.

The amounts are small per period — often a fraction of a percent. As a rough example, a funding rate of 0.01% on a $1,000 position is about $0.10 for that interval. Tiny once, but it repeats.

How often funding is charged

Commonly every eight hours (three times a day) at the major venues; some markets settle hourly. Crucially, funding only applies if you're holding the position at the funding timestamp — closing just before it lets you avoid that payment.

Factoring funding into a trade

Over days and at higher leverage, funding compounds into a meaningful carrying cost, so it belongs in your plan for any position you intend to hold:

• Persistently high positive funding signals a crowded long — expensive to hold, and prone to sharp "long squeeze" reversals.
• Funding is also a signal, not just a cost. Extreme readings often mark over-extended sentiment.

Because funding interacts with how long you hold and how much leverage you use, it pairs closely with risk management — see the Leverage & risk hub. For how one exchange applies it in practice — 8-hour intervals and set payment times — see Bybit's funding rate explained.