JustChartsWhat Is the Funding Rate in Crypto? Who Pays and How It Is Calculated
The funding rate is a periodic payment between traders holding perpetual futures, used to keep the contract price close to the spot price. When funding is positive, longs pay shorts; when it is negative, shorts pay longs. On many exchanges it is settled every 8 hours, and the payment equals your position’s notional value times the funding rate.
Key facts
- Positive funding
- longs pay shorts
- Negative funding
- shorts pay longs
- Common interval
- every 8 hours (some contracts 4h or 1h)
- Fee
- position notional × funding rate
- 0.01% per 8h
- ≈ 0.03% a day ≈ 11% a year
Why perpetual futures need funding
Ordinary futures expire, which forces their price back to spot. Perpetual futures never expire, so exchanges use funding payments instead: if the perpetual trades above spot, longs pay shorts, encouraging traders to sell it back down; if it trades below, shorts pay longs.
How to calculate a funding payment
Funding payment = position notional value × funding rate
Example: you hold a $20,000 long BTC perpetual and the funding rate is +0.01%. At the funding time you pay $20,000 × 0.0001 = $2. If you held a short instead, you would receive $2. Payments go between traders — the exchange does not keep them.
You only pay or receive funding if you hold a position at the exact funding timestamp.
What does a high funding rate mean?
- Strongly positive: many traders are long with leverage — a crowded trade. Sharp drops can trigger a cascade of long liquidations.
- Strongly negative: shorts are crowded, which can fuel a short squeeze.
- Around 0.01% per 8 hours: a common neutral baseline on major exchanges.
How funding adds up
0.01% three times a day is about 0.03% a day — roughly 11% a year on the position’s notional value. During euphoric markets funding can be several times higher, which can quietly eat into a leveraged long held for weeks.
Frequently asked questions
Who pays the funding rate?
When the rate is positive, traders holding long positions pay those holding shorts. When it is negative, shorts pay longs.
How often is funding paid?
Commonly every 8 hours (for example 00:00, 08:00 and 16:00 UTC), but some exchanges and contracts use 4-hour or 1-hour intervals. Check the contract details.
Can I avoid paying funding?
Yes — funding is only charged on positions open at the funding timestamp, so closing before it avoids the payment. Trading spot instead of perpetuals also avoids funding.
Is a negative funding rate bullish?
Not by itself. It shows short positions are popular, which can lead to a short squeeze, but crowded positioning can persist.
Put it into practice
Live charts, an economic calendar and trading calculators — free with a JustCharts account.
See live crypto liquidationsThis article is for education only and is not financial advice. Trading leveraged products carries a high risk of losing money. Contract sizes, trading hours and leverage limits vary by broker and country — always check your own broker’s specifications.