Crypto Funding Rates Explained

Crypto funding rates are periodic fees exchanged between traders in perpetual futures contracts to keep prices aligned with the actual market value of a cryptocurrency.

How It Works:

Funding Rate is a small fee paid between longs and shorts every 8 hours on Binance (timing may vary by exchange).
Positive funding rate → Longs pay shorts.
Negative funding rate → Shorts pay longs.

Why Are Funding Rates Charged?

They help balance the market:

If the contract price is higher than the real price, longs pay shorts to bring it down.
If the contract price is lower, shorts pay longs to push it up.

How Is It Calculated?

It’s based on the difference between the contract price and the spot price, usually a small percentage of the contract value.

Market Sentiment Indicator:

Positive funding = More longs (bullish sentiment).
Negative funding = More shorts (bearish sentiment).

Funding rates ensure perpetual futures stay close to real market prices while reflecting trader sentiment. 🚀