Short answer. Funding rates are regular payments between traders in perpetual futures markets. When the perpetual price trades above the spot price, longs pay shorts; when it trades below, shorts pay longs. The payment pulls the contract back towards spot. Analysts watch funding because it shows whether leveraged traders are leaning bullish or bearish.
Last updated 30 October 2026
What Are They
Funding rates are periodic payments paid by one side of a perpetual futures contract to the other. (Worth noting, the funding rate is not a fee charged by the exchange.) Because perpetual futures contracts have no expiry date, their prices can diverge from that of the underlying asset. Funding rates help keep contract prices as close as possible to the spot price. The funding rate is determined based on calculations involving:- the interest rate; and
- the premium.
Interpreting Funding Rates
When a perpetual contract’s price is above spot price, the funding rate will be positive (e.g. 0.02% or 2 basis points). When the funding rate is positive, long traders are paying short traders to have their position open. On the other hand, when a perpetual contract’s price is below spot price, the funding rate will be negative (e.g. -0.02% or -2 basis points). When the funding rate is negative, short traders are paying long traders to have their position open. For those interested solely in using funding rates as an indicator of market sentiment:- Positive funding rates are often associated with bullish market conditions
- Negative funding rates are often associated with bearish market conditions
Monitoring Cryptocurrency Funding Rates
Funding rates are used by all crypto derivatives exchanges that offer perpetual contracts. The rates are visible on these exchanges’ websites, and most exchanges update their rates every 8 hours. For example, funding rates on BitMEX are only paid or received by positions open at the end of each 8-hour period, giving traders the option to open or close a position accordingly. As for FTX, its funding rate payments are charged hourly. With dYdX, funding is charged on a per-second basis, preventing traders from strategically closing their positions. There are several websites that aggregate funding rate data and present it in a way that makes it easy to compare. Examples include Bybt, DeFi Rate and ViewBase.How to read funding rates in 2026
Perpetual futures have no expiry date, which is what “perpetual” means. Without an expiry to force the contract price back to the spot price, exchanges use funding payments instead. Each exchange sets its own funding interval and formula, so always check the contract details on the platform you are looking at.
Funding is often quoted per interval, but analysts annualise it to compare periods. A strongly positive annualised rate means traders are paying a premium for leveraged long exposure. A strongly negative rate means the reverse. Extreme readings in either direction can show that positioning is crowded on one side, which is why funding is often read alongside open interest and liquidation levels.
- Positive funding: longs pay shorts, perpetual price above spot.
- Negative funding: shorts pay longs, perpetual price below spot.
- Annualise the rate to compare across exchanges and time.
- Read funding with open interest and price, not on its own.
How the Collective Shift research team uses funding rates
In its 18 August 2026 on-chain note “Squeeze 'em: Signs of Life For Bitcoin”, the research team recorded Bitcoin funding at around 5.9% a year, with long traders paying around US$3.2 million a day in funding at that time. The team read this as a modest net long bias among leveraged traders.
The same note explains the mechanics: when the futures price trades above spot, leveraged traders are paying a premium for exposure, and funding works like an interest rate that encourages market-neutral sellers to supply liquidity on the other side.
- Track funding over weeks, not single readings.
- Compare funding with price: rising price and flat funding is a different signal from rising price and surging funding.
- Use funding as context for risk, not as a buy or sell trigger.
“Funding rates essentially act as an 'interest rate' that creates a balancing incentive for market makers to add liquidity to the other side of the trade.”
Collective Shift research team, Squeeze 'em: Signs of Life For Bitcoin (August 2026)
Where this guide comes from
This guide is written and reviewed by the Collective Shift research team. Collective Shift is a crypto research and education company founded in 2020 in Melbourne, and a research and education partner to Coinbase, Swyftx and CoinSpot. Sources used in this update:
- Collective Shift Knowledge Hub: Squeeze 'em: Signs of Life For Bitcoin, Collective Shift on-chain note (18 Aug 2026) (ref 2db1983c), original source: collectiveshift.io
- Collective Shift Knowledge Hub: Research Hub: Liquidation Cascades Explained (18 Oct 2026) (ref 9b04bc97)
Last updated 30 October 2026. General information only, not financial advice. Consider your own circumstances and seek professional advice before making investment decisions.
Frequently Asked Questions
Who pays funding when rates are positive?
When funding is positive, traders holding long perpetual positions pay those holding shorts. When it is negative, shorts pay longs.
What did Bitcoin funding look like in August 2026?
Collective Shift’s 18 August 2026 on-chain note recorded annualised Bitcoin funding of around 5.9%, with longs paying around US$3.2 million a day at that time, a modest net long bias.
Where can I learn to read market data as part of a plan?
The Collective Shift Accelerator membership is a 12-month guided program that starts with 4 live weeks and covers research, market context and portfolio planning. More free guides are on Collective Shift Insights.