What Does a Negative Basis (Discount) Imply for the Funding Rate?

A negative basis, or discount, implies that the perpetual futures contract is trading below the spot price of the underlying asset. This leads to a negative funding rate.

With a negative funding rate, short position holders pay long position holders. This payment incentivizes traders to take long positions and close short positions, thereby increasing demand for the contract and pushing its price back up toward the spot price.