Funding Rates Explained: How Perpetual Futures Fees Work
Perpetual futures ("perps") are the most traded crypto derivatives. Unlike traditional futures, they never expire. To keep their price close to the spot price, exchanges use a mechanism called the funding rate — periodic payments between long and short traders.
How funding works
- When the perpetual price trades above spot, the funding rate is usually positive: longs pay shorts.
- When it trades below spot, the funding rate is usually negative: shorts pay longs.
These payments encourage traders to take the side that pulls the perp price back toward spot. The exchange does not keep funding payments; they pass between traders.
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Open calculator →How often and how much
Many exchanges settle funding every 8 hours, though some contracts use shorter intervals. The payment is:
Funding payment = Position value × Funding rate
It is based on your full position value, not your margin.
Worked example
You hold a $20,000 long BTC position with $2,000 of margin (10×). Funding is +0.01% per 8 hours.
- Per payment: $20,000 × 0.0001 = $2
- Per day (3 payments): $6
- Per 30 days: $180 — 9% of your margin
If funding rises to +0.05% during a euphoric market, that becomes $30 a day, or $900 a month — 45% of your margin.
Annualized funding
Traders often convert funding to an annual rate to judge its cost:
Annualized rate ≈ Funding rate × payments per day × 365
0.01% × 3 × 365 ≈ 10.95% per year on the position value. On leveraged positions, the cost relative to your margin is the annualized rate multiplied by leverage.
What funding tells you about sentiment
- Persistently high positive funding means many traders are paying to stay long — a sign of crowded, leveraged optimism. Such conditions sometimes precede sharp liquidations of longs.
- Negative funding means shorts are paying — often during fear or after sharp declines.
Funding is a useful sentiment indicator, but not a precise timing signal.
Funding and your break-even
For positions held several days, funding can matter more than trading fees. A long position held for two weeks at 0.03% per 8 hours costs about 1.26% of the position value — so the price must rise at least that much (plus fees) before you profit.
Strategies involving funding
Some traders use "basis" or "cash-and-carry" trades: holding spot crypto while shorting an equal amount of perpetuals to collect positive funding. These are not risk-free — exchange risk, liquidation risk on the short leg and funding turning negative can all cause losses.
Plan your position
The position size calculator sizes your trade by risk and estimates liquidation. For trades you plan to hold for days, add expected funding to your fee estimate to see the true cost.
CryptoMathly provides educational estimates only and is not financial, investment or tax advice. Crypto assets are volatile and you can lose money. Always verify figures with a qualified professional.