Funding Rate
A funding rate is the periodic payment between long and short perpetual futures positions that helps anchor price to spot.
When a perpetual futures contract trades above spot, funding is usually positive and longs pay shorts; when it trades below spot, funding is usually negative and shorts pay longs. This incentivizes convergence toward the index price.
Funding accumulates over time and can materially affect profit and loss, especially with leverage. Spikes often occur during extreme sentiment, but they can persist longer than traders expect.
Related terms
4 linkedExplore connected entries beyond the alphabetical index.
Futures
→Futures are derivatives for long or short exposure to an asset; crypto markets commonly use perpetual futures with no expiry.
Cryptocurrency Exchange
→A cryptocurrency exchange is a platform for buying, selling, or trading digital assets through crypto or fiat markets.
Perpetual Swap
→A derivative similar to a futures contract but without expiry, kept near spot via funding payments.
Leverage
→Borrowed or synthetic exposure that increases position size, amplifying both gains and losses.
All terms and definitions may update as the Cryptionary improves.
