Concept
Funding Rate
Funding Rate is a Breadth, Sentiment & External Data concept. The Library holds 1 implementations, each one a working definition you can pull into Quant.
Top Funding Rate indicators
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What is a Funding Rate?
A funding rate is the periodic payment that keeps a perpetual futures contract tracking its underlying spot index. Perpetuals never expire, so no settlement date forces convergence; instead, at fixed intervals (commonly every eight hours, sometimes hourly), one side pays the other. When the perpetual trades at a premium to the index, funding is positive and longs pay shorts; at a discount, funding is negative and shorts pay longs. The rate is derived mainly from that premium, on many venues plus a small fixed interest component, and the payment equals the rate times position notional.
Because paying funding is the cost of holding the crowded direction, the rate doubles as a positioning gauge. Persistently high positive funding means leveraged longs are paying up to stay long; deeply negative funding means shorts are crowded. Extremes raise squeeze risk in both directions, but funding follows price and can stay elevated through a strong trend, so it is read against its own history and alongside open interest rather than in isolation.
How traders use it
- As a leverage-crowding gauge: extreme funding with rising open interest flags a crowded trade where forced unwinds, often mapped in advance via liquidation clusters, can accelerate any reversal.
- As contrarian timing context: negative funding while price holds or climbs means shorts are paying into strength, a squeeze setup traders track alongside the long/short account ratio.
- As a carry input: delta-neutral desks short the perpetual against spot holdings when funding is persistently positive, harvesting the payments; the strategy carries basis, execution, and venue risk, not free yield.
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Concept family
Breadth, Sentiment & External Data
63 concepts mapped · 61 in the Library
Funding Rate FAQ
Does high positive funding mean the market will drop?
Not by itself. Positive funding just means the perpetual trades rich to spot and longs are paying to hold. Strong uptrends can sustain elevated funding for weeks. It becomes a warning when funding sits at a historical extreme while price stalls, because crowded leveraged longs are then paying for exposure that is no longer working.
How often is funding paid and who pays it?
Most major venues exchange funding every eight hours, though some use one-hour or four-hour intervals. Only traders holding a position at the funding timestamp pay or receive it, and the payment flows between traders, not to the exchange. The amount is the funding rate multiplied by position notional, so leverage scales the cash cost of holding.
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