What Is the Crypto Funding Rate?

The funding rate is a small periodic payment exchanged between traders holding long (buy) and short (sell) positions on perpetual futures contracts. It is the mechanism that keeps the perpetual futures price anchored to the spot price.

When the funding rate is positive: longs pay shorts (market is bullish, more demand to be long).

When the funding rate is negative: shorts pay longs (market is bearish, more demand to be short).

How Funding Rates Work: A Simple Example

Imagine Bitcoin spot price is $75,000. The perpetual futures price starts trading at $75,500 because everyone wants to buy the perpetual (bullish). This $500 premium means longs are paying shorts a funding rate to incentivise more people to short the perpetual (bringing its price back down to $75,000).

If the funding rate is 0.05% per 8 hours:

You hold $100,000 long position
Every 8 hours you pay: $100,000 × 0.05% = $50
Per day: $150
Per month: $4,500

High funding rates significantly erode leveraged position profitability over time.

Funding Rate as a Trading Signal

Extremely High Positive Funding = Danger Zone for Longs

When funding reaches 0.10% per 8 hours (10.9%/month), the market is extremely overextended to the long side. Historically, this has preceded corrections of 15–30% in 70%+ of cases. This is a signal to reduce long exposure or consider short positions.

Extreme Negative Funding = Potential Bottom

When funding drops to -0.05% to -0.10% per 8 hours during a market decline, the market is extremely overextended to the short side. Short sellers are losing significant capital holding their positions. When their losses force them to close (buying back), the resulting short squeeze can be violent. Extreme negative funding often marks major local bottoms.

Funding Neutral = No Edge

When funding is near 0.01% (the equilibrium rate), the market is balanced and funding provides little directional signal. Use other indicators in this environment.

How to Track Funding Rates on CryptoPulse24

CryptoPulse24's Funding Rates page shows live funding rates across Binance, Bybit, OKX, Bitget, and BingX for all major trading pairs. You can:

Compare funding across exchanges (for arbitrage opportunities)
See historical funding charts to identify trend extremes
Sort by highest/lowest funding to find overextended coins