See "funding rate" in perpetual futures and wonder what it is? Will it secretly drain your account? sign up for Binance to check real-time rates, and download the Binance APP for live viewing.
What Is It?
The funding rate keeps perpetual contract prices aligned with spot prices. Since perpetuals have no expiry, this mechanism ensures price convergence.
Simply: it's a periodic payment between longs and shorts.
How It Works
Positive Rate
Longs pay shorts → market is overly bullish, fee discourages excessive longs.
Negative Rate
Shorts pay longs → market is overly bearish.
Settlement Frequency
Every 8 hours on Binance (00:00, 08:00, 16:00 UTC). Only positions held at settlement time are affected.
Calculation
Funding Fee = Position Value × Funding Rate
10,000 USDT long position at +0.01% = you pay 1 USDT. At -0.01% = you receive 1 USDT.
Impact on Trading
Short-Term Traders
Minimal impact for minutes-to-hours trades. But avoid holding through settlement times.
Long-Term Holders
Cumulative cost is significant. Three daily payments of 0.01% = ~0.9% monthly.
Arbitrage Opportunity
Extreme rates create arbitrage: simultaneously buy spot and short futures to collect funding payments.
Where to Check
Each futures pair shows the current rate and countdown to next settlement on the trading page.
How to Use It
Avoid Unnecessary Fees
If rate is high against your direction, consider closing before settlement.
Market Sentiment Indicator
- Persistent positive rate: Bullish market
- Persistent negative rate: Bearish market
- Extreme rates: Potential reversal signal
Understanding funding rates helps manage costs and read market sentiment.