Perpetual futures never expire, so exchanges use funding to tie their price to the spot market. At each funding time, usually every 8 hours (some contracts settle every 4 hours or every hour), traders on one side pay the other a percentage of their position's notional value. The rate rises when the perpetual trades above spot and falls when it trades below. Funding is paid between traders, not to the exchange.
Example
You hold a $20,000 BTC long and funding is +0.01% per 8 hours. At each settlement you pay $20,000 × 0.01% = $2. Held for a week (21 settlements), that is about $42. If funding jumps to +0.05% during a rally, the same week costs about $210, which is more than many trades make.
Why it matters
Funding is part of your real P&L on any position held across a settlement. It also works as a sentiment gauge: persistently high positive funding means longs are crowded and paying up to stay in, a condition that often comes before sharp long squeezes.
Common mistake
Ignoring funding on swing trades. A setup with a 3% target held for two weeks at high funding can lose a large part of its edge to payments. Check the rate and the settlement times before holding through them, and remember that the rate can change every period.
Put it into practice
- Free toolLive funding rate trackerCurrent perpetual funding rates for BTC, ETH, SOL and other majors across five exchanges, normalised to 8 hours and annualised. Updated every 5 minutes.
- Free toolCrypto futures fee calculatorMaker and taker fees at the base tier for popular exchanges, the round-trip cost of a trade, a funding estimate for the time you hold, and the move you need to cover it.
FAQ
- When is funding paid?
- Only at the settlement times. On most exchanges that is every 8 hours (00:00, 08:00 and 16:00 UTC), although some contracts settle every 4 hours or every hour. If you close before the timestamp, you neither pay nor receive that period's funding.
- Is a positive funding rate bullish?
- It means longs are paying, so demand for leveraged longs is high. That can support a trend, but very high funding also means many traders are positioned the same way, which raises the risk of a squeeze if price turns.
- How do I annualise a funding rate?
- Multiply the rate per period by the number of periods in a year. At 0.01% every 8 hours, that is 0.01% × 3 × 365 ≈ 10.95% a year.