Funding in crypto futures: what it is and when it's paid
If you trade perpetuals, every few hours you pay or receive the funding rate, even if you don’t touch the position. Many people don’t know how much it costs them. In this video CryptoBruj explains what it is, who pays whom and why it exists. Here you have that, and how to read it as a market signal.
Why it existsmin 1:05
A traditional future has an expiry date, and on that day its price has to match the spot price. A perpetual doesn’t expire: you can keep the position open for years. With nothing tying it down, its price could drift away from the real one.
Funding is what ties it down. When the perpetual trades above spot, the side pushing it up pays: the longs. When it trades below, the shorts pay. That payment encourages people to open the opposite position and brings the two prices together.
Who pays whommin 2:12
- Positive funding: longs pay shorts.
- Negative funding: shorts pay longs.
The payment is made when the countdown reaches zero, every 8 hours on most exchanges. If you don’t have the position open at that moment, you neither pay nor receive. And it isn’t a fee: what one side pays, the other receives.
What the rate depends onmin 2:48
The rate changes throughout the day. If a huge number of people are long, funding turns very positive and the longs pay more to the few who are short. If almost everyone is short, the opposite happens.
If lots of people are long, the longs pay. If lots of people are short, the shorts pay.
What it really costs
It’s paid on the full size of the position, not on your margin. With a $10,000 position:
| Funding at each payment | What you pay or receive |
|---|---|
| 0.01% | $1 every 8 hours, about $1,095 a year |
| 0.03% | $3 every 8 hours, about $3,285 a year |
| 0.05% | $5 every 8 hours, about $5,475 a year |
On a trade that lasts a few hours you barely notice it. On one you hold for weeks or months, you do: in his futures-from-scratch livestream, CryptoBruj warns that, if you’re on the same side as the market, a year of funding can eat a large part of the trade. The rate doesn’t stay fixed, so the real cost depends on how it moves.
Funding as a signal
CryptoBruj also uses funding as one more indicator. Very positive funding means almost the whole market is long and paying to stay that way; very negative funding, that almost everyone is short. The extremes tend to show up near tops and bottoms, and from there a 20% move in either direction is quite possible.
It isn’t an entry signal on its own: funding can stay high for days. It helps you avoid chasing the price when everyone is on the same side. You can see the large liquidations that come when that side breaks in large trades.
The current rate for Bitcoin, Ethereum and ten other coins on five exchanges, who pays whom and how much is open, is in funding rate and open interest.
Before you leave a position open
- Check the current rate and the time left until the next payment: it’s next to the contract’s price.
- Work out what each payment costs you: position size × rate.
- If you plan to keep it open for weeks, count funding as one more cost, alongside the fee.
- If funding is at an extreme, think about who is paying and why.
Funding isn’t included in the futures calculator or in the fee calculator: add it separately. If you’re starting from zero, the guide to crypto futures from scratch explains the rest, and the one on leverage and liquidation, how position size is calculated.
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Educational content. This is not financial advice or an investment recommendation. Trading with leverage can make you lose all the capital you put in.