What is a funding rate?
Every perpetual future has a funding rate, and it decides who pays whom while you hold a position. Here is how it works and how to turn any venue's rate into one number you can compare.
A funding rate is a periodic payment between the longs and shorts of a perpetual future that keeps its price close to the underlying index. When the rate is positive, longs pay shorts; when it is negative, shorts pay longs. It is a percentage of position size, settled every 1, 4 or 8 hours depending on the venue and market.
Why do perpetual futures need funding?
A normal futures contract has an expiry date. On that date it settles at the spot price, so its price has to converge to spot as expiry gets closer. A perpetual future (a perp) never expires, so nothing forces that convergence. Funding does the job instead. If the perp trades above its index, longs pay shorts: holding a long gets more expensive and holding a short gets more attractive until the gap closes. If the perp trades below the index, the payment runs the other way.
The idea goes back to the economist Robert Shiller, who proposed perpetual contracts in 1993. BitMEX popularised them in crypto in 2016. Today perps are the main crypto derivative on both centralized exchanges (CEXs) and decentralized ones (DEXs).
Who pays whom?
| Funding rate | Perp price vs index | Who pays | Who receives |
|---|---|---|---|
| Positive | Above the index, or close to it | Longs | Shorts |
| Negative | Below the index | Shorts | Longs |
Funding passes from one group of traders to the other. The venue does not take a cut: Binance's own FAQ says it does not charge fees on funding payments. On most venues you pay or receive funding only if your position is open at the moment of settlement. Close a minute before it and nothing changes hands.
How is the funding rate calculated?
Binance, Bybit, Hyperliquid and Lighter all use the same family of formulas. The rate for a period has two parts, a premium and an interest term:
funding rate = premium + clamp(interest − premium, −0.05%, +0.05%)
The premium
The premium measures how far the perp trades from its index. Binance and Hyperliquid do not use the last trade price for this. They use impact prices: the average price at which a set notional would fill against the order book on the bid or the ask side. The premium is sampled through the period (every 5 seconds on Binance and Hyperliquid, once a minute on Lighter) and averaged. The exact versions are in the Hyperliquid docs and Binance's funding FAQ.
The interest term
The interest part is fixed, by default at 0.01% per 8 hours on Binance, Bybit and Hyperliquid, and on most Lighter markets. The clamp keeps the correction between −0.05% and +0.05%, so whenever the premium is within 0.05% of the interest rate, the rate comes out at exactly 0.01% per 8 hours. The formula gives an 8-hour rate, and venues that pay more often scale it down. A calm market therefore shows 0.01% on an 8-hour Binance or Bybit market, 0.005% on a 4-hour one and 0.00125% per hour on Hyperliquid: different numbers, the same 10.95% APR. That baseline is why longs pay shorts by default.
Caps
Venues also limit how far funding can go, and the limits differ a lot. Hyperliquid caps funding at 4% per hour and Lighter at 0.5% per hour. Binance caps BTC and ETH at ±0.30% per interval, a few other majors slightly higher and most other perps at ±2%; Bybit caps BTC and ETH at ±0.333%. A cap of 0.30% per 8 hours is about 329% APR. A cap of 4% per hour works out to about 35,000% a year, so it is a safety limit rather than a working ceiling: on major coins, Hyperliquid's funding has far more room to spike than Binance's or Bybit's.
How often is funding paid: every 1, 4 or 8 hours?
Most perp DEXs settle every hour. Hyperliquid computes an 8-hour rate and pays one eighth of it each hour; Lighter also quotes an 8-hour rate and pays hourly. CEXs settle every 4 or 8 hours, and the interval is set per market. As of October 2026, BTC and ETH pay every 8 hours on Binance and Bybit, while most other crypto perps there pay every 4.
Intervals also change when funding runs hot. Since May 2025, Binance moves a market to hourly settlement after a settlement hits the cap, and since January 2026 it moves the market back to 4 hours after 16 calm cycles in a row. Since 30 October 2025, Bybit also moves a market to hourly settlement automatically when its rate hits the cap (BTC and ETH perps were left out at launch). The funding countdown on a venue's trading screen shows when the next payment happens. Check it instead of assuming one interval per venue.
How do you convert a funding rate to APR?
A 0.01% rate means different money on an hourly venue and on an 8-hourly one, so first bring every rate to one hour, then annualize. Our methodology uses two lines:
rate_hourly = funding_rate / interval_hoursAPR = rate_hourly × 8760
Divide by the hours the quoted rate covers. That is usually the payment interval, but not always: Lighter's API quotes an 8-hour rate while paying hourly, so its figure is divided by 8. APR here is simple, not compounded: the hourly rate times the 8,760 hours in a year. Common rates convert like this:
| Rate per interval | Per hour | APR (simple) |
|---|---|---|
| 0.01% per 8 h | 0.00125% | 10.95% |
| 0.01% per 4 h | 0.0025% | 21.90% |
| 0.01% per 1 h | 0.01% | 87.60% |
| 0.03% per 8 h | 0.00375% | 32.85% |
| 0.05% per 8 h | 0.00625% | 54.75% |
The first row is the one to remember. The default 0.01% per 8 hours already comes to about 11% a year, so a rate that looks tiny on a trading screen is not small for a position held for weeks. The same printed 0.01% is also worth eight times more on an hourly venue than on an 8-hourly one.
What does funding cost on a real position?
The payment is the position's notional times the rate. A hypothetical example (an illustration, not a forecast):
- A $10,000 long at +0.01% per 8 hours pays $1 at each settlement, $3 a day, and about $1,095 a year if the rate never changed. It will change.
- The same long on a venue charging +0.00125% per hour pays $0.125 an hour, which is also $3 a day: the same APR in smaller, more frequent payments.
- A $10,000 short at −0.03% per 8 hours pays $3 at each settlement, because negative funding runs from shorts to longs.
Venues value the notional slightly differently: Binance multiplies your size by the mark price, Hyperliquid by the oracle price and Lighter by the index price. The difference is small, but the same rate on the same size can pay a slightly different amount on two venues. And funding is paid only to and from positions that are open at a settlement: a position held for 6 hours on an 8-hourly venue catches one payment or none, depending on when you open it.
What is the difference between predicted and settled funding?
The rate a CEX shows next to its countdown is a prediction: the venue's estimate for the next payment, based on the premium so far in the current period. It moves all the time and is fixed only at settlement. The funding history shows what was actually paid. DEXs differ as well: some publish the rate for the hour in progress, others the last settled one. That makes any single "now" figure noisy. Our screener ranks pairs on 7-day averages built from settled payments, and uses the latest predicted rate only for hours that are not settled yet.
Is negative funding bullish or bearish?
Neither, on its own. Negative funding means the perp trades below its index and shorts are paying to stay short. It describes positioning, not where the price goes next. Very negative or very positive funding points to a crowded side, and crowded positions sometimes unwind fast in a squeeze, after which funding usually falls back toward the baseline. But funding can also stay extreme for days while the price keeps moving the same way. Treat it as one input, not a trading signal. Rates change all the time, and nothing here is investment advice.
Why does the same coin pay different funding on different venues?
Each venue's rate comes from its own order book, its own traders and its own index or oracle, under its own interval and cap. Funding runs higher on a venue crowded with leveraged longs than on one where traders mostly hedge. In a July 2026 snapshot of our data, BTC's 7-day funding was 10–11% APR on seven of the ten DEXs that listed it; of the other three, one was near 8%, one near 2% and one negative. The BTC page shows every venue side by side.
When the gap is wide and steady, a long where funding is lower and a short of the same size where it is higher collect the difference, before fees: that is funding rate arbitrage. For how intervals, caps and fees differ between venue types, see funding on DEXs and CEXs.
FAQ
Does the exchange keep the funding fee?
No. Funding is paid between traders on opposite sides of the perp. Binance, for example, states that it does not charge fees on funding payments. You still pay normal trading fees when you open and close a position.
Do I pay funding if I close before the funding time?
Generally no. Funding is paid by, and to, positions that are open at the moment of settlement. On hourly venues that moment comes every hour, so even short holds catch payments.
Why does a 0.01% funding rate matter?
Because it repeats. 0.01% every 8 hours is 0.03% a day and 10.95% a year in simple terms. On an hourly venue, 0.01% per hour would be about 87.6% a year.
Is negative funding bullish or bearish?
Neither by itself. It means shorts pay longs because the perp trades below its index. Extreme funding shows crowded positioning, which can unwind sharply, but it is not a reliable price signal.
Why is funding different on Hyperliquid and Binance?
Each venue computes funding from its own order book and index, with its own interval and cap. Hyperliquid pays every hour with a cap of 4% per hour; Binance settles every 4 or 8 hours depending on the market, with much tighter caps on BTC and ETH.
How often is funding paid?
Most perp DEXs pay every hour. Binance and Bybit settle every 4 or 8 hours depending on the market and switch a market to hourly when funding hits its cap. The countdown on the venue's trading screen shows the next payment.