What is the funding rate in crypto?
Most explanations stop at “longs pay shorts”. That is true and nearly useless, because it hides the number that closes accounts: funding is quoted against the position but deducted from the margin. The gap between those two amounts is your leverage.
What is a funding rate and who actually pays it?
Perpetual futures never expire, so something has to pull the contract back towards the real market. At each interval — every 8 hours on most venues — the exchange compares the perpetual price to an index of spot prices. Trading richer, longs send a percentage of their position value to shorts; trading cheaper, shorts pay longs. The money moves trader to trader; the exchange only referees. On most venues 0.01% is the neutral resting level funding drifts back to when nobody is crowded.
How much does funding really cost over a month?
Worked on a $10,000 long held 30 days. Three payments a day is 90 a month, so the monthly cost on the position is the rate × 90.
| Rate per 8h | Per day | Over 30 days (of position) | Cost on $10,000 | As % of margin at 10× |
|---|---|---|---|---|
| 0.01% baseline | 0.03% | 0.90% | $90 | 9.0% |
| 0.03% | 0.09% | 2.70% | $270 | 27.0% |
| 0.05% crowded | 0.15% | 4.50% | $450 | 45.0% |
| 0.10% near the cap on many venues | 0.30% | 9.00% | $900 | 90.0% |
Read the last column again. At 10×, a month of merely crowded funding costs 45% of the money you posted, before a single tick goes against you. Your leverage multiplier is also your funding multiplier. Run your numbers in the funding cost calculator.
What does the funding rate tell you about the market?
Funding is the cleanest crowd gauge in crypto because it is not a survey — it is money changing hands. Persistently high positive funding means the leveraged crowd is long and paying for the privilege, historically the condition that precedes liquidation cascades. Deeply negative funding after a crash is the mirror image. Read it beside open interest: that tells you how much is on the table, funding tells you which side is paying.
When is “funding is high, so sell” the wrong read?
Two things break it. Funding is a condition, not a trigger: it can sit at 0.05% for three weeks while price grinds upwards, and a short taken purely on high funding is liquidated long before the crowd is. And funding is not a cost for everyone — on the short side of a positive-funding market you are being paid that 0.05%. High funding says the fuel is stacked. It says nothing about when someone lights it. It is also not interest charged by the exchange, and never applies to spot.
FAQ
Is a high funding rate bullish or bearish? Directly it only means longs are crowded and paying. Some traders read extreme positive funding as a contrarian warning rather than a buy signal, because crowded leveraged longs are what a long squeeze feeds on. It is a risk reading, not an entry.
Do I pay funding on spot trades? No. Funding applies only to perpetual futures — one of the quiet reasons spot suits beginners.
How often is funding charged? Every 8 hours on most major venues, so three times a day. Some contracts settle every 1 or 4 hours, multiplying the daily cost — check the contract specification before assuming 8.
Check what funding is costing right now
Funding rates are set per venue and change every few hours. A rate you read in an article is a snapshot; the live number is on the exchange.
Compare the three exchanges we use →
Or see where funding is settled on-chain →
Perpetual DEXs publish every funding payment on a public ledger, so the number you are charged is the number anyone can audit. That transparency is worth something — but you hold your own keys there, so read what that actually costs you before you use one.
Those pages carry referral links and say so up front — including what each venue does badly.
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