What the funding rate is in crypto, in plain words
The funding rate is a regular payment between longs and shorts on perpetual futures. When the rate is positive, longs pay shorts; when it's negative, shorts pay longs, and the exchange usually keeps nothing. For a trader, funding is the cost of holding a position and a hint at which side of the market is crowded.
In short
- Positive funding means longs pay shorts, negative means shorts pay longs. Only positions open at settlement pay or receive.
- Payment = position size × rate. It's charged on the whole position, not on your margin, so with leverage it adds up.
- Compare rates only over the same period: 0.01% every hour costs 8 times more than 0.01% every 8 hours.
- Funding shows which side is crowded, not where price will go.
Who pays whom, and why funding exists
A regular futures contract has an expiry date, and its price converges with spot by then. A perpetual has no such date, so the exchange compares its price with the coin's spot index and sets a rate. That's how funding nudges the perpetual price back toward spot.
- Positive funding — the perpetual trades above spot, longs pay shorts.
- Negative funding — the perpetual trades below spot, shorts pay longs.
- The stronger the imbalance between leveraged buyers and sellers, the further the rate moves from zero.
An illustrative example: the BTC spot index is $60,000, and the perpetual trades at $60,300, 0.5% higher. Leveraged buyers outnumber sellers, the rate turns positive, and holding a long gets more expensive while a short gets paid. Some traders sell the perpetual and buy spot to collect the payment, and the price gap narrows. Only perpetual futures have funding; spot has none — more in the article on spot vs futures.
When funding is charged and how much you'll pay
When
Settlement follows the exchange's schedule. On 8-hour pairs at large exchanges it's usually 00:00, 08:00, and 16:00 UTC; on 4-hour pairs every 4 hours; on Hyperliquid every hour. Only positions open at the moment of settlement pay or receive: a position closed a minute before pays nothing. The exchange shows the time to the next settlement on the contract page.How much: the formula
Payment = position size × rate. Position size is the number of coins times the mark price at settlement. Margin and leverage aren't in the formula: at 10x you put up a tenth of the position, but pay funding on all of it.An illustrative example
A long of 0.5 BTC at $60,000 is a $30,000 position; at 10x leverage the margin is $3,000. Settlement every 8 hours:- Rate +0.01%: $3 per settlement, $9 a day, about $270 over 30 days — 9% of the margin.
- Rate +0.1%: $30 per settlement, $90 a day — 3% of the margin every day, even if price doesn't move.
Why rates from different exchanges aren't directly comparable
An exchange publishes the rate for its own settlement interval, and intervals differ between venues and even between pairs.
Eight hours is no longer the rule
On Binance and Bybit a large share of pairs settle every 4 hours, and Hyperliquid charges funding every hour. The interval can also change for a single pair: some exchanges shorten it when the rate hits its cap. How many pairs on each exchange use which interval is on the funding intervals page.Same number, different cost
An illustrative example: the same +0.01% per settlement over different intervals.| Interval | Settlements a day | Per day | Annualized |
|---|---|---|---|
| 8 hours | 3 | 0.03% | ≈ 11% |
| 4 hours | 6 | 0.06% | ≈ 22% |
| 1 hour | 24 | 0.24% | ≈ 88% |
How to compare fairly
Bring rates to one period — 8 hours or a day — by multiplying each rate by the number of settlements in that period. An illustrative example: exchange A with a 4-hour interval shows +0.02%, exchange B with an hourly interval shows +0.004%. Over 8 hours that's +0.04% vs +0.032%: a long costs more on exchange A, even though the raw numbers look five times apart.What this means for screener thresholds
The funding screener's thresholds are compared with the rate for each exchange's own interval. So on hourly venues the same threshold is reached less often than on 8-hour ones. The gap between exchanges, on the other hand, is calculated after bringing rates to 8 hours.What a negative funding rate means
The rate turns negative when the perpetual trades below spot: leveraged sellers outnumber leveraged buyers. Typical causes:
- a sharp market drop, when many traders open shorts;
- hedging: spot holders sell the perpetual to protect their coins against a price drop;
- a thin market in a new or illiquid coin, where a few large shorts noticeably move the perpetual price.
An illustrative example: a $20,000 short at −0.05% every 8 hours pays $10 per settlement, $30 a day, and a long of the same size receives it. But the payment doesn't protect you from price moves: if price falls 2% in a day, the long collects $30 in funding and loses $400 on price. A negative rate shows shorts are crowded, not that a rise is coming: the imbalance can last for days.
What counts as extreme funding, and how to read it with OI
Normal and extreme
On many exchanges the rate sits around +0.01% per 8 hours in a calm market. Extremes are measured against that baseline, adjusted for the interval. An illustrative example: +0.1% per 8 hours is 10 times the baseline, 0.3% a day, and about 110% annualized — that's what longs are willing to pay to hold. The exchange caps how high or low the rate can go.
Funding alone doesn't tell you whether the imbalance is building or unwinding. Open interest — the number of open contracts — does:
| Funding and OI | What is happening |
|---|---|
| Funding ↑ OI ↑ | New leveraged longs are opening and willing to pay extra to hold. The imbalance is building. |
| Funding ↓ below zero, OI ↑ | Shorts are piling up: sellers open new positions and pay for it. |
| Funding extreme, OI ↓ | The crowded side is closing, liquidations included. The rate often returns to normal. |
| Funding extreme, OI flat | The imbalance holds. Neither metric tells you how long it will last. |
How the screener helps
By hand you can check funding on a few coins, while extremes show up on any of hundreds of pairs. The screener checks the rate on every perpetual contract across the exchanges you pick (9 in total) every minute and sends an alert the moment the rate crosses your positive or negative threshold, flips sign, or drifts apart between exchanges by more than you set. The alert shows the current and previous rate, the same rate annualized, and the 24-hour price range. No need to pick a coin.
Common funding mistakes
- Calculating from margin. Funding is charged on the whole position: at 20x, a 0.1% rate per settlement is 2% of your margin.
- Comparing raw rates. Without bringing them to one interval, the “cheap” exchange can turn out to be the most expensive.
- Forgetting long holds. $9 a day is invisible in one trade and adds up to $270 over a month.
- Treating negative funding as income. The payment to a long is almost always smaller than an ordinary daily price move.
- Reading an extreme as a reversal call. The rate shows an imbalance, and an imbalance can last longer than your margin can.
If what you care about is the gap between one coin's rates on different exchanges as an ongoing state, rather than the moment a threshold is crossed, there's a separate funding arbitrage screener: it compares rates brought to one interval.
Funding rate FAQ
What is the funding rate in simple terms?
Funding is a regular payment between long and short holders on perpetual futures. When the perpetual trades above spot, longs pay shorts; when it trades below, shorts pay longs. That's how an exchange keeps the perpetual price close to spot.
When is funding charged?
On the exchange's schedule: most often every 8 hours, but many pairs settle every 4 hours, and Hyperliquid settles every hour. Only positions open at the moment of settlement pay or receive. The exchange shows the time to the next settlement on the contract page.
What does a negative funding rate mean?
The perpetual trades below spot, and shorts pay longs. It usually means leveraged sellers outnumber leveraged buyers. A negative rate says nothing about where price will go: the imbalance can last for days.
How do I calculate funding on a position?
Multiply the position size by the rate. 0.5 BTC at $60,000 is $30,000; at +0.01% the long pays $3 per settlement, or $9 a day with three settlements. Leverage doesn't change the amount: it's charged on the whole position, not the margin.
Why is funding different on different exchanges?
Each exchange has its own traders, its own rate caps, and its own settlement interval. The same number over different intervals means a different cost, so rates are first brought to one period — 8 hours or a day.
Can I avoid paying funding?
Funding is paid only by positions open at the moment of settlement. Spot has no funding at all. A position closed before settlement neither pays nor receives anything.
Where rates are furthest from zero right now is on the funding extremes page. How funding, together with other data, shows crowd sentiment is covered in “Market sentiment”, how traders read extreme rates in “Funding rate use cases”, and every form field in the funding screener settings.
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