When the rate is positive, longs pay shorts; when negative, shorts pay longs. The exchange takes no side, it only settles the transfer. Only positions open at the settlement timestamp pay.
The headline number is deceptively small. A rate of 0.01% per eight hours annualises to roughly 11%; 0.05% annualises past 50%. Funding comes out of your margin, so it also drags your liquidation price closer while you wait.
The mistake it causes: reading high funding as a sell signal. It is a crowding gauge - useful context about who is already positioned, not a prediction.
What a small rate annualises to
Funding looks negligible per payment and is anything but over time. Most venues settle three times a day.
| Rate per 8h | Per day | Annualised | On $10,000 |
|---|
| 0.01% | 0.03% | 10.95% | $1,095 / year |
| 0.05% | 0.15% | 54.8% | $5,475 / year |
| 0.10% | 0.30% | 109.5% | $10,950 / year |
| 0.30% | 0.90% | 328.5% | $32,850 / year |
Funding is charged on position value, not on your margin. At 20x leverage a $10,000 position is backed by $500, so sustained 0.3% funding consumes the entire margin in under three weeks. The trade does not have to be wrong. It only has to be slow.
Who pays whom
Positive rate: longs pay shorts. Negative rate: shorts pay longs. The exchange takes no side and only settles the transfer. Payment happens at fixed timestamps, usually 00:00, 08:00 and 16:00 UTC, and only positions open at that exact moment pay. Closing a minute before settlement costs nothing, which is why some traders deliberately flatten when funding is extreme.
Reading funding as positioning, never as a signal
High positive funding means leveraged longs dominate and are paying for the privilege. That tells you which side of the book is fragile if price slips, which is useful context for where a stop belongs. It does not tell you direction: strong trends run for weeks with expensive funding, and traders who short purely because funding is high get run over regularly. We do not publish price predictions, and funding is not one in disguise.
The quiet effect on liquidation
Because funding comes out of margin, a leveraged position paying funding is drifting toward its own liquidation price while you wait to be right. On a multi-day hold this matters more than the fee schedule. Price it on the funding rate calculator, and ask whether the position simply belongs in spot, where there is no carry at all.
