Funding Rate

Funding rate is the mechanism that keeps a non-expiring perpetual contract anchored to spot. At each funding timestamp the rate (a small percentage, often with a fixed interest component plus a premium based on how far the perp deviates from spot) is applied to position notional and transferred between longs and shorts. Positive funding means longs pay shorts; negative means shorts pay longs. Because it recurs every few hours, an extended position in a one-sided market accrues a real, compounding cost — sometimes large enough to turn a profitable price call into a net loss.

In plain English — The funding rate is the recurring fee exchanged directly between traders holding perpetual positions — it is not a fee paid to the exchange. When the perp trades above spot, longs typically pay shorts (positive funding); when it trades below spot, shorts pay longs (negative funding). This incentive pulls the contract price back toward the underlying. Held over time, funding can quietly add up to a meaningful cost or income.

Funding is +0.01% every 8 hours and you hold a $5,000 long perp. Each interval you pay about $0.50 to shorts — roughly $1.50 a day, or ~$45 a month if the rate persists. In a strongly bullish, crowded-long market, funding can spike far higher and bleed a leveraged position.