Does Volatility Always Lead to a Positive Funding Rate?

No, volatility does not always lead to a positive funding rate. Volatility increases the magnitude of the funding rate, but the direction (positive or negative) depends on whether the contract price is trading at a premium (contango) or a discount (backwardation) to the spot price.

High volatility can cause rapid shifts in sentiment, leading to either extreme positive rates (longs dominating) or extreme negative rates (shorts dominating).