How does the funding rate change between spot and perpetual futures?

It changes depending on how big of a gap exists between spot and perpetual futures, in order to close the gap again. If an exchange needs to push perp price up to close the gap, the funding rate will be lowered to incentivize buying (or short closing).

How do perpetual futures work?

Since perpetual futures do not have defined end dates, a price-anchoring method called a “funding rate” is established. It provides regular payments between buyers and sellers. The funding rate balances short and long positions by incentivizing a market balance. It’s like a rebate or fee to keep the market balanced.

What is the funding rate for a long position on perpetual?

To do this, they will increase the funding rate to 0.05%. After the change, everyone with a long position on perpetual will have to pay 0.05% of their position size to the shorts (which get paid 0.05% of their position sizes, respectively), each funding period. The funding period is usually eight hours long.

What is the funding rate in crypto futures?

If you have ever traded crypto futures, you must have encountered the so-called funding rate. This small percentage can eat away your position. But what does it do? Let’s find out! What Is the Funding Rate? Funding rate was introduced to maintain the balance between the price of perpetual futures and the price of the underlying instrument.