How is the funding rate calculated?

The initial Funding Rate is calculated based on the 8-Hour Interest Rate and Premium Index. The final Funding Rate is calculated based on the initial Funding Rate, previous Funding Rate (T-1), Initial Margin, and Maintenance Margin and will be applied for use at the funding timestamp.

Why is a funding rate important?

A funding rate is an important factor to consider when trading perpetual futures contracts, as they are the force that drives the perpetual contract price to converge with the index price of its underlying asset. They are amounts of assets paid between short and long traders with perpetual contract positions. What is a funding rate?

What does a positive funding rate mean?

When the Funding Rate is positive, the price of the perpetual contract is usually higher than the mark price. Thus, traders who are long pay for short positions. Conversely, a negative Funding Rate means that short positions pay for longs. Funding Rates are paid peer-to-peer.

How to calculate funding fee for USDT-m futures?

The funding fee calculation for USDT-M futures is as follows: Example: Trader A holds a long position of 10 BTC in the BTCUSDT futures, while the current fair price is 10,000 USDT and funding rate is 0.01%. Since the funding rate is positive (0.01%), the long trader must pay the funding fee to the short trader.