1
Why perpetual futures need funding
Traditional futures have an expiry date that pulls their price toward spot. Perpetual contracts never expire, so exchanges need another tool. Funding is that tool: it charges the overcrowded side and pays the opposite side to keep the perp anchored to spot.
- Perps do not expire, so they can drift away from spot without a correction mechanism.
- Funding gently pushes the perp price back toward the underlying market.
- It is a transfer between traders, not a fee paid to the exchange.
2
Who pays and who receives
At each funding event, one side pays and the other side receives. The direction depends on whether the perp trades above or below spot. The trader mainly needs to know which side they are on before the payment.
- When perp trades above spot, funding is usually positive and longs pay shorts.
- When perp trades below spot, funding can be negative and shorts pay longs.
- The receiving side collects funding only if the position is open at the funding time.
3
Funding intervals and next funding time
Exchanges settle funding on a schedule, often every eight hours, but intervals differ. The next funding time decides when the payment actually lands, which matters for short-term setups.
- Common intervals are every 8 hours, but some venues use 4h or 1h.
- Two exchanges can settle funding at different times.
- A high rate far from the next funding time is less reliable than a rate close to payment.
4
Why the funding rate can change quickly
Funding is recalculated from live market conditions, so it can move before the next payment. A rate that looks attractive now can shrink or flip if demand shifts.
- Funding reacts to the gap between perp and spot price.
- Crowded positioning can reverse quickly around news or listings.
- Always confirm the current rate close to entry, not an old snapshot.
