Glossary
Funding rate
A periodic payment between long and short holders of perpetual futures that keeps the contract price close to the spot price.
Perpetual futures never expire, so exchanges use a funding rate to tie them to the underlying market. When the rate is positive, traders holding longs pay those holding shorts; when it is negative, shorts pay longs.
The payment is a percentage of the position’s notional value and is exchanged at fixed intervals set by each exchange, often every eight hours. The exchange itself is not a party to the payment.
Traders watch funding as a gauge of positioning. A rate that stays strongly positive suggests many traders are paying to hold longs; a strongly negative one suggests the same for shorts.
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For education only, not financial advice. Crypto assets and stocks are volatile, and leveraged positions can lose more than the money you put in.