When a perpetual trades above the spot price, more traders are long than short, and funding turns positive: longs pay shorts. When it trades below, the flow reverses. The payment is usually settled every eight hours and is charged on position size, not on margin, so a leveraged position pays funding on the full notional value.
The rate doubles as a positioning gauge. Persistently high positive funding means the long side is crowded and paying to stay there, a condition that often precedes a sharp unwind, because those positions are both leveraged and bleeding. Sustained negative funding says the same about shorts. Extended periods at either extreme are read as a sign the market is leaning hard one way.
What does a negative funding rate mean?
The perpetual is trading below spot and shorts outnumber longs, so shorts pay longs. Holding a long position through negative funding earns the payment rather than paying it.
Last updated October 17, 2026