What Is the Funding Rate in Crypto? Simple Explanation
Funding is a series of regular payments between longs and shorts on perpetual futures. These payments keep the futures price close to the spot price.
Why funding exists
A perpetual futures contract has no expiration date, so its price can drift far from spot. To prevent that, every few hours (most often every 8 hours) the exchange takes a payment from one side and credits it to the other.
| Rate | Who pays | What it means |
|---|---|---|
| Positive | Longs pay shorts | More people want to buy |
| Negative | Shorts pay longs | More people want to sell |
Example
A $1000 long position with a rate of +0.01%. At settlement you pay $0.10. That's not much, but if you hold a position for weeks while the rate is high, funding noticeably eats into your result.
What to know
- Funding is paid only by those who have a position open at settlement time.
- The rate changes: check it, along with the next settlement time, in the contract details.
- A very high rate is a sign the market is lopsided, but it's not an entry signal.
How futures work is explained in spot vs. futures, and other costs are covered in crypto exchange fees.
Our partner link. If you decide to open an OKX account, sign up through this link: it's free for you and doesn't change your terms in any way. If you trade, the exchange pays Aspiro a referral bonus, which goes toward developing our apps and the free Academy. We have no access to your account, your funds or your trades.
- Funding is a payment between longs and shorts on perpetual futures.
- Positive rate — longs pay; negative — shorts pay.
- If you hold for a long time, funding noticeably affects the outcome.
Frequently asked questions
Is there funding on spot?
No. Funding only exists on perpetual futures (perpetuals).
Does the exchange receive the funding?
No, it's usually a payment between traders themselves. The exchange earns from trading fees.
How can I avoid paying funding?
Close the position before settlement or trade on spot. But exiting a trade just to avoid funding isn't always wise.
Start with free education
A step-by-step OKX guide and free Aspiro Academy courses: 26 lessons on investing and trading from scratch, with practice and a certificate.