WHAT IS FUNDING RATE?
Funding rates are periodic payments between long and short traders in perpetual futures contracts. They keep the futures price anchored to the spot price.
POSITIVE RATE (+)
π’ Longs pay shorts. Market is bullish. Consider opening short to earn funding.
Extreme: >0.1% β Very overbought market
NEGATIVE RATE (-)
π΄ Shorts pay longs. Market is bearish. Consider opening long to earn funding.
Extreme: >-0.1% β Very oversold market
BINANCE FUNDING SCHEDULE
Funding is paid every 8 hours: 00:00, 08:00, 16:00 UTC
Payment = Position Value Γ Funding Rate
Annual Rate = Funding Rate Γ 3 Γ 365
TRADING STRATEGIES
β’
Funding Arbitrage: Long spot + Short futures to earn funding when rate is high
β’
Rate Reversal: Extreme rates often revert β trade against the crowd
β’
Cost Management: Reduce leverage when holding positions through multiple funding periods