Perpetual futures never expire — so what stops the contract price from drifting away from the real asset? Funding: periodic payments exchanged directly between longs and shorts, invisible in the fee schedule but frequently the largest cost (or income) line of a held position. If you trade perps and can't explain funding, you're trading with a blindfold on one eye.
The mechanism in one paragraph
When the perp trades above spot (traders are net-long and paying up), the funding rate goes positive and longs pay shorts — a tax on the crowded side that nudges the price back down toward spot. When the perp trades below spot, the rate goes negative and shorts pay longs. The payment is peer-to-peer; the exchange just settles it. Rate × your position notional = what you pay or receive, each interval.
The numbers that matter
A typical calm-market rate is +0.01% per 8 hours — the "baseline" many CEXs default to. Sounds negligible; annualize it: 0.01% × 3 × 365 ≈ 11% per year for the privilege of being long. In euphoric markets, rates on hot assets run 5–10x higher — 50–100%+ annualized — and during panics they flip deeply negative. Two rules of thumb follow:
- For any position held days or weeks, expected funding usually exceeds your round-trip trading fees.
- Extreme funding is a sentiment gauge: when longs are paying triple digits annualized, crowdedness itself becomes a risk factor.
Project the exact cost of any position with our funding calculator — per interval, daily, and annualized, with a chart of the cumulative bleed.
Intervals differ by venue — compare annualized
Venues settle funding at different cadences, which makes raw per-interval rates misleading:
- Hyperliquid settles hourly — smaller rates, more often; smoother carry and finer-grained timing for short holds.
- Bybit and most large CEXs settle every 8 hours on standard contracts.
- Phemex follows the 8-hour convention.
- Lighter settles on short (hourly-class) intervals like other modern perp DEXs.
A +0.002%/1h rate and a +0.016%/8h rate look different but annualize identically (≈17.5%). Our live funding page normalizes everything to annualized so venues compare honestly.
Practical consequences for your trading
Timing: on 8-hour venues, funding is charged to whoever holds through the timestamp. Opening minutes after a settlement gives you nearly a full interval "free"; closing just before one avoids the charge. Hourly venues largely erase this game.
Direction selection: persistent positive funding means being short *pays you to wait* — a structural tailwind for patient bearish theses, and the seed of every funding arbitrage strategy.
Position review: a leveraged long paying 0.05%/8h loses ~4.7% of notional monthly to carry alone — against 10x-leverage margin, that's ~47% of capital per month. Positions can die of funding without price ever moving against them; leverage magnifies the bleed, as we detail in How Leverage Changes Your Trading Costs.
The takeaway
Before any perp position: check the current rate, annualize it, multiply by intended notional and hold time, and decide whether your expected edge clears the carry. Thirty seconds of arithmetic — the calculator does it for you — separating traders who understand their costs from those who discover them on the monthly statement.