What is a funding rate in crypto?

A funding rate in crypto is a small, regular payment that passes between buyers and sellers of perpetual futures. Its job is to keep the price of a contract that never expires close to the coin's actual market price. Anyone holding a perpetual position pays or receives funding, even if the price does not move.

What is the funding rate in perpetual futures?

A perpetual future, or perp, is a futures contract with no end date. BitMEX launched the first one, for bitcoin, on May 13, 2016. Because a perp never settles, nothing forces its price back toward the spot price. Funding fills that gap.

If the perp trades above the spot price, the funding rate turns positive and traders who are long pay those who are short. That makes holding a long more expensive and pulls the price down. If the perp trades below spot, the rate turns negative and the flow reverses. How longs, shorts and leverage work is covered in what are crypto futures and leverage.

Binance's help page shows the usual formula. The rate combines a premium index, which measures the gap between the contract and spot prices, with a small fixed interest component, by default 0.01% per 8 hours. The payment is the position's value multiplied by the rate. Binance says it charges no fee on funding, because the money moves directly between traders.

How often is funding paid?

It depends on the venue, as of October 2026:

• Binance pays by default every 8 hours, at 00:00, 08:00 and 16:00 UTC. A contract can switch to hourly funding after its rate hits the cap or floor, and later switch back.
• Hyperliquid, a decentralized exchange, pays every hour at one-eighth of an 8-hour rate.
• Coinbase Derivatives launched perpetual-style futures for US traders on July 21, 2025. Funding accrues hourly and settles twice a day.

Only positions open at the funding time pay or receive.

What does a negative funding rate mean?

A negative rate means the perp is trading below spot, usually because more traders want to be short. Shorts then pay longs. Ethena, which holds large short positions to back its USDe token, publishes data showing that bitcoin and ether perps have had negative funding on a minority of days, about 16% and 17.5% respectively in its sample. See what is Ethena USDe.

What is funding rate arbitrage?

Funding rate arbitrage pairs a position in the coin itself with an opposite perp position. For example, a trader holds bitcoin and shorts the same amount in a perp. Price moves on the two sides roughly cancel out, and the trader collects funding while it stays positive. This is the core of Ethena's design.

It is not risk-free. Funding can turn negative, so the trader pays instead. The exchange holding the short could fail, and a sharp move can still trigger liquidation if the perp side runs low on margin. The general mechanics of short positions are in how does shorting crypto work.