Funding Rate in Crypto: How Perpetual Futures Fees Work

The funding rate is a periodic payment exchanged between long and short traders on a perpetual futures market, designed to keep the contract's price close to the underlying asset's spot price. When the perpetual trades above spot, longs pay shorts; when it trades below, shorts pay longs. It is the main ongoing cost, or income, of holding a perpetual position.

Funding rate definition

Traditional futures have an expiry date, and their price converges to spot as that date approaches. Perpetual futures never expire, so they need another way to stay anchored. The funding rate is that anchor.

Funding is paid between traders, not to the exchange. It is expressed as a percentage of position size per interval. On Binance, for example, funding is settled every 8 hours, at 00:00, 08:00 and 16:00 UTC, according to Binance's funding rate documentation (checked October 2026). Other venues, including many perp DEXs, settle hourly or continuously.

A positive funding rate means longs pay shorts, which usually happens when demand for leveraged long exposure is high. A negative rate means shorts pay longs.

How the funding rate works

1. Measure the premium. The exchange compares the perpetual's price (often a mark price) with an index price built from spot markets through a price oracle.
2. Add an interest component. Many exchanges add a small fixed rate. Binance, for instance, uses an interest component of 0.01% per 8-hour interval on most contracts, per the same documentation.
3. Cap and publish. The result is usually clamped within limits and shown in advance so traders can see the next payment.
4. Settle. At each funding time, every open position pays or receives: position notional × funding rate. Positions closed before the timestamp neither pay nor receive.

Because funding pushes traders toward whichever side is cheaper to hold, it creates the incentive that pulls the perp price back toward spot. Our perp DEX explainer shows how this fits with margin and liquidations.

Funding rate example

A hypothetical position. Say you open a $10,000 long on a BTC perpetual and funding is +0.01% per 8-hour interval.

• Per interval: $10,000 × 0.0001 = $1 paid by you to shorts.
• Per day (3 intervals): $3.
• Over a year, if the rate stayed constant: $3 × 365 = $1,095, or about 10.95% of the position.

Now say sentiment overheats and funding rises to +0.05% per interval. The same position now costs $5 per interval, $15 a day, roughly 55% annualised. A trader on the short side of that market earns those payments instead, which is why high funding attracts traders who short the perp while holding the spot asset.

Why the funding rate matters

• It is a holding cost. Small-looking rates add up. Anyone keeping a leveraged position for weeks should treat funding as an interest bill that can change every interval.
• It is a sentiment gauge. Persistently high positive funding signals crowded longs; deeply negative funding signals crowded shorts. Combined with open interest, it shows where leverage is concentrated.
• It is a yield source, with risks. Strategies that short perps against spot holdings collect positive funding. That is the engine behind synthetic dollars such as Ethena's USDe, explained in our USDe guide, and behind many delta-neutral strategies. When funding turns negative, that yield reverses.
• Venues differ. Intervals, caps and formulas vary between exchanges, so compare them before choosing where to trade; see our best perp DEXs of 2026.

Related terms

• Open interest — the total open perpetual and futures positions.
• Leverage — larger exposure than your collateral, which funding is charged on.
• Cross margin vs isolated margin — how funding payments draw on your margin.
• Price oracle — the index-price source used to calculate the premium.
• Real yield — yield paid from genuine revenue, such as funding, rather than emissions.

Learn more on the JewelSwap blog

• What is a perp DEX? — the mechanics of perpetual futures on-chain.
• Best perp DEXs 2026 — compare venues, fees and funding designs.
• What is USDe (Ethena)? — a synthetic dollar whose yield comes largely from funding.
• Delta-neutral yield farming — hedging price exposure while collecting yield, including funding.

Frequently asked questions

What does a positive funding rate mean?

A positive funding rate means the perpetual is trading above the spot index, so traders holding longs pay those holding shorts at each funding interval. It usually indicates strong demand for leveraged long exposure.

Funding rate vs interest rate: what is the difference?

An interest rate is paid to a lender for borrowed money. A funding rate is paid between long and short traders to keep a perpetual's price near spot, and it can flip direction. Many exchanges include a small interest component inside the funding formula.

How often is the funding rate paid?

It depends on the venue. Binance settles most perpetuals every 8 hours, while many perp DEXs settle hourly or continuously. You only pay or receive funding if you hold a position at the settlement time.

JewelSwap Crypto Glossary · educational, not financial advice. Updated 2 October 2026. Browse the full glossary.