What is a funding rate?
A recurring payment between long and short holders of a perpetual future that keeps its price tethered to spot. Positive means longs pay shorts; negative means shorts pay longs.
Updated August 24, 2026
Why it exists
A traditional future expires. On the expiry date its price and the spot price must meet, and that certainty is what keeps the two in line beforehand.
A perpetual future never expires, so nothing forces it back to spot. The funding rate is the replacement mechanism: at fixed intervals, whichever side is crowded pays the other. Holding the popular side costs money, holding the unpopular side earns it, and that cost pulls the contract back toward spot.
Who pays whom, and how often
When the contract trades above spot, the rate is positive and longs pay shorts. When it trades below, the rate is negative and shorts pay longs.
On most venues funding settles every eight hours, so a position pays or receives three times a day. You are only charged if you hold the position at the settlement moment — closing before it and reopening after avoids that particular payment.
The rate is quoted per settlement, not per year. A rate of 0.01% means one hundredth of a percent of position value at that settlement — about 0.03% a day if it holds, which compounds into a meaningful number over weeks of a leveraged position.
What it tells you
Funding is two things at once: a cost of carry, and a crowding gauge. The second is what traders read it for.
A rate that stays high says the long side has been paying, for a while, to stay in. That is information about positioning: a lot of leveraged money is on one side, and it is paying rent to be there. Crowded positioning unwinds sharply when it unwinds, because the exits are narrow.
What it does not tell you
It is not a timing tool and not a prediction. Funding can stay elevated far longer than it seems it should, and a crowded side can keep being right for weeks. "Funding is high, therefore a reversal is due" is the single most common misreading of this number.
It also says nothing on its own about direction. High positive funding in a strong uptrend and high positive funding in a stalling one mean different things, and the difference is visible only next to price, volume and open interest.
How to read it in context
The pairing that carries most of the meaning is funding next to open interest:
- Funding high, open interest rising — new leveraged money is entering the crowded side. The crowd is growing.
- Funding high, open interest falling — the crowd is leaving and paying to leave. Positions are being closed, not opened.
- Funding near zero — neither side is paying much for the privilege; the contract is close to spot and positioning is not stretched.
Common questions
- Is a high funding rate bearish?
- Not by itself. It says the long side is crowded and paying to stay in, which raises the risk that an unwind is sharp when it comes. It does not say when, or that it will come at all — crowded positioning can persist for weeks.
- How often is funding actually charged?
- On most venues every eight hours, three times a day. You pay or receive only if you hold the position at the settlement moment.
- Can I earn funding?
- Yes — holding the unpopular side collects it. That is the basis of delta-neutral funding strategies, where the futures position is hedged with spot so the income is the rate rather than the price move. It is not free money: the hedge costs something and the rate can flip.