In the past few days, $ALPACA has been very aggressive. A friend asked me if I could explain the concept of funding rate to inexperienced friends. The funding rate is a mechanism in perpetual contracts used to balance the positions of both longs and shorts. Simply put, it is the interest that longs and shorts pay each other. The level of the rate reflects market sentiment: a positive rate indicates more longs, while a negative rate indicates more shorts. If the funding rate reaches -2% and is settled every hour, that amounts to -24% in a day, which is a significant test for positions, especially for longs, as the fees will eat into your principal. Shorts can only be entered and exited quickly, which has little operational significance; otherwise, you either follow the trend to go long or do nothing. If someone urges you to open a short position with a high funding rate, you can directly blacklist them!