LESSON 1 / 4 · 7 MIN
Perpetual futures and funding
Understand what funding is and what a positive or negative rate tells you.
Most crypto trading is not bitcoin itself but perpetual futures: contracts that track the price, never expire and allow leverage. Since they never expire, something has to keep their price close to spot. That something is funding.
Every few hours — every eight on many exchanges, but intervals vary — longs and shorts pay each other. If the perpetual trades above spot, funding is positive and longs pay shorts. If it trades below, funding is negative and shorts pay longs.
Key idea
Funding is the price of being leveraged in one direction. Very positive funding means many people are paying to be long: the trade is crowded. Negative funding during a fall means shorts are crowded.
Common mistake
Crowded is not the same as wrong. Funding can stay high for weeks while the price keeps rising. It tells you where the fuel for a sharp move is, not when the move happens.
On the site · /derivatives
Open /derivatives and find 'Funding and open interest by exchange'. Is funding positive or negative on most exchanges today?
Open it on the site →Check yourself
Funding is strongly negative while the price falls. Who is paying whom?