Funding Rates

Funding rates are periodic payments between traders to make the perpetual futures contract price is close to the index price.

Definition

Funding rates are periodic payments to long or short traders based on the difference between the perpetual contract market and the spot price. Funding rates make the perpetual futures contract price close to the index price. All cryptocurrency derivatives exchanges use funding rates for perpetual contracts. Funding rates in the given period and exchange. The standard unit is a percentage.

Interpretation

Funding rates represent traders' sentiments of which position they bet on in the perpetual swaps market. Positive funding rates imply that many traders are bullish and long traders pay funding to short traders. Negative funding rates imply many traders are bearish and short traders pay funding to long traders.

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