The cost that hides in plain sight
Traders compare exchanges on maker and taker fees, then hold a leveraged perpetual for a week and pay many times that amount in funding without ever seeing a line item for it. Funding is deducted from your margin on a schedule, which means it also drags your liquidation price closer while you wait to be right.
Why the annualised number is the honest one
A rate of 0.01% per eight hours reads as nothing. Paid three times a day, every day, it is roughly 11% a year. At 0.05% it is over 50%. No position thesis survives that kind of carry for long, which is exactly why funding tends to pull an over-extended perp back toward spot.
What high funding is telling you
Funding is a crowding gauge. Strongly positive means leveraged longs dominate and are paying shorts to stay in. That does not make a reversal due - trends can run for weeks with expensive funding - but it does tell you who is already positioned, and who gets liquidated first if price slips. Read it as context about the other side of the book, never as a prediction.
Cheaper ways to hold the same view
If funding is eating the trade, the position may simply belong in spot, where there is no carry at all. Compare spot costs on the crypto fee calculator, and see which venues we rate for perps in our exchange reviews.
What a "small" rate annualises to
| Rate / 8h | Per day | Annualised | On a $10,000 position |
|---|---|---|---|
| 0.005% | 0.015% | 5.5% | $548 / year |
| 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 |
Note what the bottom row means at leverage. A $10,000 position opened with $500 of margin at 20x, held through sustained 0.3% funding, pays its entire margin in funding in under three weeks. The trade does not need to be wrong to lose everything, only slow.
Reading funding as a crowding gauge
Funding is the price of agreement. Strongly positive means leveraged longs dominate and are paying shorts to stay in, which tells you who gets liquidated first if price slips. Strongly negative means the opposite. Neither predicts direction - trends run for weeks with expensive funding - but both tell you which side of the book is fragile, and that is useful context when deciding where a stop belongs.
When the position belongs in spot instead
If the thesis is measured in months, a perpetual is usually the wrong instrument. Spot has no funding, no liquidation price and no settlement clock. The convenience of leverage is priced, and over a long hold it is priced heavily. Compare spot costs on the fee calculator, and check how close the line sits on the liquidation price calculator before deciding.
Frequently asked
What is a funding rate?
A periodic payment exchanged directly between long and short holders of a perpetual futures contract, usually every eight hours. It exists because a perpetual never expires, so something has to tether it to spot price. When the rate is positive, longs pay shorts; when negative, shorts pay longs. The exchange takes no side, it only settles the transfer.
Is a 0.01% funding rate expensive?
It is the typical neutral level and annualises to about 11% a year when paid three times daily. That is already a real cost on a held position. When funding spikes to 0.1% per period it annualises past 100%, which is a crowded, expensive trade that has to move fast to be worth holding.
How do I calculate funding cost?
Cost per payment = position value × funding rate. Total = cost per payment × number of settlements you hold through. A $10,000 position at 0.01% pays $1 per period, $3 a day, about $1,095 a year. Note it is charged on position value, not on your margin, so at 10x leverage the annual funding can exceed the margin you posted.
Do I pay funding if I close before the payment time?
No. Funding is only charged on positions open at the exact settlement timestamp, typically 00:00, 08:00 and 16:00 UTC. A position opened and closed between two timestamps pays nothing, which is why some traders flatten just before settlement when funding is extreme.
Can funding rates predict price?
They tell you about positioning, not direction. Persistently high positive funding means the crowd is leveraged long and paying for it, which is the condition that makes a long squeeze possible. But it can stay that way for weeks in a strong trend. Treat it as context about who is already positioned, never as a signal. We do not publish price predictions.
What is a funding arbitrage or cash-and-carry trade?
Holding spot and shorting the perpetual at the same size, so price moves cancel out and you collect funding while it is positive. It is not free money: it ties up capital on two venues, carries counterparty and liquidation risk on the short leg, and the rate can flip negative at any settlement. Treat it as a real position, not a yield product.
Does funding affect my liquidation price?
Yes, and it is the part most people miss. Funding is deducted from your margin, so a long paying positive funding is slowly walking toward its own liquidation price even while the chart does nothing. Check the distance on the liquidation price calculator before holding a leveraged position overnight.
Is funding different on every exchange?
Yes. The rate, the cap, the interval and the index it is calculated from all differ by venue and by market. Most settle every eight hours, some every four, and some perpetual DEXs settle hourly. Always read the live rate on the venue you actually trade rather than assuming a standard.
Trading is high risk and most retail accounts lose money. This tool is education only, not financial advice.