You open a long on a Bitcoin perpetual, the price sits flat for eight hours, and your balance still ticks down by a few dollars. No trade closed, no stop hit. That small deduction was the funding rate. A funding rate is a small recurring payment made directly between the traders holding long and short positions, and it is the one mechanic that lets a contract with no expiry track the spot price. This guide is about funding on crypto perpetual futures. Below: what a perpetual is, why funding exists, who pays whom, how often, and what a 0.01% rate actually costs you.
First, what is a perpetual future?
A normal futures contract has an expiry date. On that date it settles at the spot price, so the two prices are forced to meet. That built-in deadline is what keeps a dated future anchored to the underlying.
A perpetual future, or perp, throws the expiry away. You can hold it forever. Great for traders, except it also removes the thing that dragged the contract back to spot. Nothing stops a wildly bullish crowd from bidding the perp 2% above the real BTC price and parking it there.
Funding is the replacement anchor. Instead of a settlement date, the perp uses a repeating cash payment between the two sides to lean the price back toward spot.
So what is the funding rate?
The funding rate is a small percentage, set by the exchange from live market data, that one side of the contract pays the other at fixed times. The exchange usually takes none of it. The money moves peer to peer, from longs to shorts or from shorts to longs, sized to each trader's position.
Two things define any funding rate: the sign, which decides who pays, and the size, which decides how much. Both come from how far the perp has drifted from spot.
Why funding exists: it is the tether
Think through what a positive rate does. The perp is trading above spot, so funding is positive and every stamp the longs hand the shorts a slice of their notional. Holding a long now carries a running cost. Holding a short now earns a running income. That imbalance invites traders to short the pricey perp and buy the cheaper spot against it, and their selling pushes the premium back down.
The mirror case works the same way. When fear drives the perp below spot, funding goes negative, shorts pay longs, and the paid-to-be-long incentive pulls the price back up.
Funding never forces the two prices equal the way an expiry does. It leans on them. A stubborn premium becomes expensive to hold and profitable to fade, so the crowd's own wallet drags the perp home.
Positive vs negative funding: who pays whom
The whole thing hinges on one sign flip. Here is the entire rule in a table.
| Funding | Perp vs spot | Typical mood | Who pays | Who receives |
|---|---|---|---|---|
| Positive (+) | perp above spot | crowd leaning long | longs pay | shorts receive |
| Negative (−) | perp below spot | crowd leaning short | shorts pay | longs receive |
Positive is the default state in a healthy bull market. Everyone wants leveraged long exposure, the perp trades at a premium, and longs pay shorts for the privilege of holding that eagerness. Negative funding shows up when the crowd piles into shorts, often mid sell-off. The perp trades at a discount and shorts pay longs.
Who collects flips the instant the premium flips sign, and there is more nuance to that flip than one table can hold. If negative funding is where you are headed, read who pays whom when funding goes negative next.
How often funding is charged
Funding is not continuous. It settles at fixed timestamps, and you only pay or receive if you are holding the position at that exact moment. Open a long at 08:05 and close it at 15:55, and if the stamps land on 08:00 and 16:00, funding never touches you.
Most large venues run an 8-hour cadence on their major markets. Binance, Bybit, OKX and MEXC settle at 00:00, 08:00 and 16:00 UTC, three times a day. Bitget, Gate and HTX mostly sit on the same schedule. But the interval belongs to the contract, not to the venue: KuCoin keeps 8 hours on the majors and puts most of its other pairs on a 4-hour cycle, Binance runs 4 hours on plenty of alts, and an overheated market can be cut shorter still. A few venues, like Hyperliquid, settle every hour across the board. Check the interval on the contract you are actually trading, not on the exchange's name.
Cadence matters more than beginners expect. A rate of 0.01% charged hourly is eight times heavier than 0.01% charged every 8 hours, simply because it fires eight times as often. Same number on the screen, very different bill. That trap earns its own read: why 0.01% on one venue is not 0.01% on another.
How the rate is quoted, and what it actually costs
Funding is quoted as a percentage per interval, for example +0.0100%. That percentage is charged on your position notional, the full size of the position, not on the margin you put up. On a $10,000 long with funding at +0.01%, you pay $1 at the stamp. Tiny. But it repeats, and repetition is the whole point.
Stack the baseline up: 0.01% three times a day is 0.03% per day, and roughly 11% a year. That is the neutral rate many exchanges even use as a default when the perp sits right on spot. When a market gets crowded, funding can run to 0.10% or more per 8 hours, which annualizes past 100%. A high funding number is the market shouting that positioning is badly one-sided.
Beginner tip: because funding is charged on notional, leverage multiplies its bite relative to your own money. A 0.01% funding on a 10x position is 0.1% of your margin every 8 hours, not 0.01%. The number on the screen is the same, the pain is ten times larger.
What funding does to a position you hold
Say you hold a $10,000 long on a BTC perp for three days while funding sits steady at +0.01% per 8h.
- Three days at an 8-hour cadence is nine funding stamps.
- Each stamp charges 0.01% of $10,000, which is $1.
- Total funding paid over the hold: nine times $1, so $9.
That $9 has nothing to do with whether BTC rose or fell. It is pure carry, the cost of holding a long while the perp trades at a premium. Now flip sides. Hold the same $10,000 as a short for those three days and you receive the $9 instead.
That receiving side is the seed of an entire strategy. Hold a delta-neutral pair, long on one venue and short on another, positioned so the funding lands in your pocket rather than leaving it, and price moves on the two legs cancel out. The full arithmetic is in funding arbitrage.
What beginners get wrong about funding
- It is not a fee to the exchange. Funding is a transfer between traders. Do not confuse it with trading fees, which the exchange does keep. One is peer to peer, the other is the house's cut.
- One stamp is tiny, a long hold is not. On a multi-day leveraged position, funding can quietly become your largest cost, or your steadiest income, dwarfing the spread you entered on.
- High funding is a warning, not a gift. A perp paying 0.3% per 8h, over 300% annualized, means one side is dangerously crowded. That is frequently the moment the crowded side gets liquidated and the rate snaps back the other way.
- You are exposed only across the stamp. Scalping in and out between timestamps means funding never applies. It is a cost of holding, not a cost of trading.
Where Finder fits
Finder tracks the live funding rate for every perpetual across 24 exchanges, Binance, Bybit, OKX, MEXC, Gate, Bitget, KuCoin, HTX and more, and keeps a 30-day funding history so you can tell a one-off spike from a stable regime. It also normalizes every rate to a common window, so a 1-hour venue and an 8-hour venue sit in the same column and compare honestly. If you would rather read the rates than do the math by hand, that is the funding scanner.
FAQ - funding rates
What is a funding rate in simple terms?
A funding rate is a small recurring payment exchanged directly between the long and short holders of a perpetual futures contract. It exists to keep the perp's price close to the underlying spot price. When the perp trades above spot the funding is positive and longs pay shorts, when it trades below spot the funding is negative and shorts pay longs.
Who pays the funding rate, the trader or the exchange?
Traders pay each other. Funding is a peer-to-peer transfer between the two sides of the contract, and the exchange usually takes no cut of it. That is different from trading fees, which the exchange does keep.
How often is funding paid?
On most large venues (Binance, Bybit, OKX, MEXC) every 8 hours, at 00:00, 08:00 and 16:00 UTC. Many altcoin contracts run a 4-hour cycle and a few venues, like Hyperliquid, settle every hour. You only pay or receive if you hold the position at the exact settlement timestamp.
Is a 0.01% funding rate a lot?
By itself, no. 0.01% on a $10,000 position is $1 per settlement. But it repeats. At the common 8-hour cadence that is about 0.03% a day and roughly 11% a year. Rates above 0.1% per 8 hours annualize past 100% and flag very one-sided positioning.
Do I pay funding if I close before the timestamp?
No. Funding only touches positions that are open at the settlement moment. Open and close entirely between two stamps and you pay nothing. It is a cost of holding across a stamp, not a cost of trading.
Is negative funding good or bad for me?
It depends on your side. Negative funding means shorts pay longs, so a long position receives the payment and a short position makes it. Which side collects flips the moment the perp crosses from a premium to a discount, and the details are in who pays whom when funding goes negative.
Can you earn money just from funding?
Yes, that is the idea behind funding arbitrage. You hold offsetting long and short positions so price moves cancel and you collect the funding spread. It is not free money, fees and rate reversals and execution all bite, but it is a real delta-neutral approach covered in funding arbitrage.
Is crypto funding the same as funding on traditional-market perps?
The mechanism is the same idea, a periodic payment that tethers a perpetual to its underlying. This guide uses crypto venues and crypto numbers. On other markets the cadence, the underlying and the typical size all differ, so do not carry a crypto funding figure straight across.
Not financial advice. The numbers here are illustrative. Real funding rates change every few hours and depend on how skewed open interest is at the time. Watch a market's funding history before you assume today's rate is normal for it, and size small until the mechanics are second nature.
Read on: the same 0.01% is not the same across venues, walked through in funding cadence math. When the rate flips and the payer changes, see negative funding, who pays whom. Turning funding from a cost into income is funding arbitrage. Where funding sits in the wider basis picture is futures arbitrage, and the pillar crypto arbitrage guide ties the pieces together. Live rates across 24 venues are in the funding scanner.