Funding rate: who pays whom on perpetual futures

The funding rate is a periodic payment exchanged directly between holders of long and short positions on perpetual futures, which are contracts with no expiration date. When the contract trades above the spot price, the rate is usually positive and longs pay shorts. When it trades below, the reverse applies. The mechanism is meant to keep the contract price close to the market price.

Funding is charged at fixed intervals that depend on the platform, and the rate changes with market sentiment. Holding a position through many periods at a high rate can significantly weigh on your result, even if the price stays flat. Funding is also sometimes treated as a measure of crowding on one side of the market, but on its own it does not predict the direction of a move.