What is a funding rate in crypto futures?
A funding rate decides the payment between long and short traders in perpetual futures. See who pays, how much, and what the countdown means.
A funding rate in crypto is the percentage used to calculate a recurring payment between traders holding perpetual futures positions. When the rate is positive, longs pay shorts. When it is negative, shorts pay longs. The payment helps keep the futures price close to the underlying crypto's spot price.
If you still hold a position when the funding countdown reaches zero, you pay or receive funding at that settlement. A positive rate means a long pays and a short receives; a negative rate reverses that. If the settled rate is zero, there is no payment. Check the contract's funding rules and schedule.
Positive vs negative funding: who pays whom?
A long gains when the crypto's price rises and loses when it falls. A short gains when the price falls and loses when it rises, before costs.
| Funding rate | Long position | Short position |
|---|---|---|
| Positive | Pays funding | Receives funding |
| Negative | Receives funding | Pays funding |
| Zero | No funding payment | No funding payment |
Funding passes between the two sides of the market. It is separate from the trading fee charged for executing an order. A negative rate means the paying side has changed; it does not mean everyone gets a refund.
How much is the funding fee? A worked example
Suppose your app shows a funding rate of +0.01% and you hold a Bitcoin long worth 1,000 USDT. You keep it open until the countdown reaches zero, and the final rate is still +0.01%.
The 1,000 USDT is the value of all the Bitcoin your position represents. This is your full position value. It is different from the smaller amount you may have put down to open the trade, called margin.
Funding payment = 1,000 × 0.01% = 0.10 USDT.
Because the rate is positive and you are long, you pay 0.10 USDT. A short of the same value receives 0.10 USDT. At -0.01%, the direction reverses: your long receives 0.10 USDT and the short pays it.
For USDT-settled perpetuals, multiply the position value at settlement by the size of the funding rate. Its sign and your direction determine whether you pay or receive. The rate shown before settlement can change.
These contracts value a position using the amount of crypto it represents multiplied by the mark price, the exchange's reference price for valuing it. Funding uses that whole value, even if you put down less margin. You do not multiply the funding payment by leverage again. Our guide to leverage in crypto trading explains how position value and margin differ.
What does the funding countdown mean?
The countdown shows the time remaining until the next funding settlement. The displayed rate can change before that time, so it may differ from the final rate used for the payment.
A common schedule is every eight hours at 00:00, 08:00 and 16:00 UTC. In India, those times are 05:30, 13:30 and 21:30 IST. Cryptathon uses this schedule.
Other contracts may use shorter intervals, including one, two or four hours. Check the contract's interval alongside its rate: an eight-hour percentage is not a daily or annual rate.
In Cryptathon, only positions open at the funding time pay or receive. A position opened and fully closed between two funding times has no funding payment. The exchanges' settlement rules in the sources below also require an open position at the funding time. Check your contract's rules for the exact timing.
Why do perpetual futures need funding?
Perpetual futures have no expiry date. Their price can drift away from the spot price, the price for buying or selling the crypto itself. Funding creates an incentive for traders to bring the two prices closer.
When the perpetual trades above its spot reference, funding generally makes holding a long more costly and holding a short more attractive. When it trades below, the incentive generally reverses. This helps anchor the contract price without an expiry date.
Does receiving funding mean your trade is profitable?
A funding credit is only one part of the result. Price losses and trading fees can outweigh it. Funding can also be payable while a position is already losing money.
On some exchanges, funding charges can come out of position margin when the available balance is insufficient. That leaves less room before liquidation, the forced closure of a position that no longer meets its margin requirement.
How is the funding rate calculated?
The rate is the percentage; the fee is the payment calculated from it. Exchanges commonly base the rate on the gap between the perpetual price and a spot-price index, averaged over time and subject to limits. Some also include an interest component. The formula varies by contract.
Cryptathon uses the eight-hour average of that price gap as a percentage of the index, with no separate interest component. Its rate is capped at +0.75% or -0.75% per eight hours.
Learn it step by step: the free Funding lesson works out funding payments for a long and a short, with worked USDT examples and short questions.
Practise funding with virtual money
Cryptathon is our crypto paper trading game for Android and the browser. You start with 10,000 virtual USDT. All money is virtual, and nothing can be withdrawn.
Each market screen shows the current funding rate and countdown. After a funding settlement, open Positions > History and tap the position. Its timeline shows a Funding paid or Funding received line with the amount, time and rate.
Sources
- Funding fee calculation: payment direction, position value, settlement checkpoints and deductions from margin.
- Introduction to funding rate: changing estimates, premium averaging and interest components.
- Perpetual funding fee mechanism: eight-hour settlements and alternative intervals.
- What are perpetual futures?: no expiry, long and short exposure, and the purpose of funding.
Frequently asked questions
What is a funding fee in crypto futures?
The funding fee is the amount paid or received on a perpetual futures position using the funding rate. For USDT-settled contracts, it is calculated from the full position value at settlement. The rate is a percentage; the fee is the resulting payment.
What does a negative funding rate mean?
A negative funding rate means shorts pay longs. It changes the direction of the funding payment. A long receiving funding can still lose money through price movements and trading fees.
Do I pay funding if I close before the countdown ends?
In Cryptathon, a position fully closed before the funding time does not pay or receive funding at that settlement. The exchanges' settlement rules in the sources above also require an open position at the funding time. Check your contract's rules and schedule.
Is funding charged on my margin or my position value?
For USDT-settled perpetual futures, funding is calculated on the full position value, rather than just the margin you put down. Multiplying that value by the rate already accounts for the size of your exposure; do not multiply the result by leverage again.
What time is funding charged in India?
Cryptathon settles funding at 05:30, 13:30 and 21:30 IST, every eight hours. This corresponds to 00:00, 08:00 and 16:00 UTC. Real contracts can use different schedules, so the market's countdown and funding interval determine its next settlement.
Can I see funding without risking real money?
Yes. Cryptathon shows the current funding rate and countdown on each market screen. To see a settled payment, open Positions > History and tap the position. Its timeline shows Funding paid or Funding received with the amount, time and rate. All money in Cryptathon is virtual, and nothing can be withdrawn.