Understanding Funding Rates in Perpetual Futures

Perpetual futures never expire, which raises a question: what keeps their price from drifting away from spot? The answer is the funding rate — periodic payments exchanged between longs and shorts.

When the perp trades above spot, the funding rate is positive: longs pay shorts, incentivizing selling pressure that pulls the perp back toward spot. When it trades below, shorts pay longs. Rates are quoted per funding interval (commonly every 8 hours, varies by venue) and annualized for comparison.

Funding is both a cost and a signal. A persistently high positive rate means the market is heavily long — bullish sentiment, but also a crowded position that can unwind violently. Deeply negative funding means crowded shorts. Extreme readings in either direction have historically preceded squeezes.

For traders, funding is a real carrying cost: holding a leveraged long through many positive funding intervals adds up. For delta-neutral strategies, collecting funding on a short perp while holding spot is the basis trade — one of the few market-neutral yield sources in crypto, with its own risks around margin and liquidation.

Dexana's perps dashboard shows live funding alongside positions and PnL, so the carry cost is visible before it compounds against you.