Funding rate: what it is and how to read it
The funding rate is a periodic payment between buyers and sellers of a perpetual futures contract. It keeps the contract price close to the price of the underlying asset and is, at the same time, the source of income in funding arbitrage.
Why funding exists
A perpetual contract has no expiry date, so its price does not converge to spot on its own the way a quarterly future does. Exchanges solve this with a payment: when the contract trades above spot, longs pay shorts and holding a long becomes more expensive. When the contract trades below spot, shorts pay longs. The payment goes between traders, not to the exchange (the exchange only takes a trading fee).
Who pays whom
- Positive rate — longs pay shorts. It happens when the market is overheated and the contract trades at a premium.
- Negative rate — shorts pay longs. It happens during sell-offs, when the contract trades at a discount.
- Payment size:
position notional × rate. It is charged on the notional value of the position, not on the margin, so leverage does not change the payment; it only changes the payment relative to your capital.
How the rate is calculated
Details differ between exchanges, but most use the same scheme: the rate is made of a premium (how far the contract price is from the index) and a fixed interest component. In simplified form:
On many exchanges the interest component is 0.01% per 8 hours — the baseline that funding returns to in a calm market. The upper and lower bounds also differ by exchange, and for individual contracts they can be wider or narrower.
Payment intervals
The most common interval is 8 hours (payments at 00:00, 08:00 and 16:00 UTC), but it is not universal:
- many exchanges have contracts with a 4-hour or 1-hour interval — usually volatile or recently listed coins, where the exchange shortens the interval so that the price returns to the index faster;
- some perp DEXes (for example Hyperliquid) accrue funding every hour;
- the interval can differ between contracts on the same exchange, and the exchange may change it.
How to compare rates with different intervals
Rates are brought to one period — a day or a year. For a day: rate × (24 / interval in hours).
| Rate | Interval | Per day | Annualized (simple) |
|---|---|---|---|
| 0.01% | 8 h | 0.03% | ≈ 11% |
| 0.01% | 1 h | 0.24% | ≈ 88% |
| 0.05% | 4 h | 0.30% | ≈ 110% |
| −0.02% | 8 h | −0.06% | ≈ −22% |
Annualized figures are only a way to compare, not a forecast: the rate changes all the time and can flip sign.
Predicted rate and actual payment
The rate an exchange shows right now is a preliminary number. The payment is made at the rate fixed at the moment of settlement, and by then it may be different. To estimate how profitable a pair really is, the history of actual payments matters most: it shows how often the rate held at the level you need.
What to do with it
- Read it in pairs. For arbitrage it is not a single rate that matters but the difference between two exchanges — see how funding arbitrage works.
- Look at history. A rate that held for several days says more than a one-off spike.
- Count fees and spread. Funding is only one part of the result; the rest is covered in the guide to the cross-exchange spread.
- Remember the risks. See the arbitrage risk checklist.
How SpreadScope shows it
In the scanner each leg’s rate is brought to the pair’s interval, and the “funding spread” shows the difference between the two exchanges’ rates. Accumulated funding is calculated from actual payments over the chosen periods (a day, three days, a week and so on), and the spread chart marks the payment moments — so you can see how much a pair has actually earned or lost on funding.