Skip to main content
Learn

How Does the “Funding Rate” Mechanism Work?

Periodic Payment. Price $uparrow$ Spot $rightarrow$ Longs Pay Shorts. Arbitrage Incentive 78.
Greeks.Live18.11.25

How Does the “Funding Rate” Mechanism Work?

The Funding Rate is a periodic payment between traders of perpetual swap contracts, designed to keep the contract price close to the spot price of the underlying asset. If the perpetual price is higher than the spot price, long position holders pay short position holders (positive funding rate).

If lower, shorts pay longs (negative rate). This acts as an arbitrage incentive.

How Does TVL Relate to a Protocol’s Security?
Define “Implied Volatility” and Its Role in Option Pricing
How Does the Funding Rate Mechanism Work to Keep Perpetual Futures Prices Close to the Spot Price?
What Happens to the Funding Rate during Periods of Extreme Market Volatility?

About

Contact

Editorial Policy

Terms of Service

Privacy Policy

Cookie Policy

© 2025 Greeks.Live

All Rights Reserved

Greeks.Live RFQ

Build by Noo on Engine

Source: The content on this website is produced by Greeks.live's proprietary analysis systems, which utilize advanced Large Language Models (LLMs). This information might not be subject to a full human review before publication and may contain errors.
Responsibility: You should not make any financial decisions based solely on the content presented here. We strongly urge you to conduct your own rigorous due diligence and to consult a qualified, independent financial advisor.
Purpose: All information is intended for informational purposes only. It should not be construed as financial, investment, trading, or any other form of professional advice. News and data are not trading signals.
Risk: The cryptocurrency, derivatives, and options markets are highly volatile and carry significant risk. By using this site, you acknowledge these risks and agree that Greeks.live and its affiliates are not responsible for any financial losses you may incur.