Why Funding Rates Deserve Your Attention
Perpetual futures never expire, so every few hours an exchange balances their price against spot. When the perp trades above spot, longs pay shorts; when it trades below, shorts pay longs. That payment—the funding rate—is simply money moving from one crowd to the other. The exchange is just the postman.
Positive Funding: When the Herd Is Bullish
Contracts sit above spot, longs are footing the bill.
- Buy the coin on spot.
- Short the same amount in the perp.
- Price can whip anywhere-—every eight hours you collect the fee.
Negative Funding: When Bears Run the Show
Perps trade below spot, shorts now pay the tab.
- Short the coin on spot (or via margin).
- Go long the perp for the same size.
- Direction still doesn’t matter—as long as funding stays negative, the payouts keep coming.
What the Math Looks Like
Imagine funding at +0.03 % per period. On a one-BTC position worth $100 000, that’s $30 every eight hours—about $90 a day. Annualised, the yield can rival high-end DeFi farms, provided the rate and fee structure hold steady.
Caveats People Gloss Over
- Fees add up. Trading, withdrawal, margin costs—tally every cent.
- Liquidity shocks kill the gravy train. Once euphoria subsides, positive funding can evaporate overnight.
- Exchange risk is real. Spot and perp usually sit on the same platform; a withdrawal pause turns a hedged book into a hostage situation.
Four Ground Rules
- Shop for the best rate on multiple venues. Park the perp where funding is highest.
- Skip leverage. A liquidation wipes out the whole idea.
- Keep margin headroom. A sudden wick shouldn’t drag your account into the danger zone.
- Check rates daily. One lazy day can erase a month’s payouts.
Who Should Consider It
Long-term holders who’d rather milk a coin than sell it, funds hunting for steady cash flow, and traders with more discipline than FOMO.
Bottom line
Funding arbitrage looks humble—a few hundredths of a percent per cycle—but patience turns crumbs into a solid annual yield. Beat three enemies—fees, platform hiccups, and personal complacency—and you’ll be earning from patience, not price predictions.
