A periodic payment exchanged between longs and shorts on perpetual futures to keep contract prices anchored to spot.
When the perpetual trades above spot, funding is positive and longs pay shorts; below spot, funding is negative and shorts pay longs. This incentivizes convergence toward the index price.
If BCH-PERP trades above spot with +0.01%/8h funding, long positions pay shorts every 8 hours until the premium narrows.
Funding accumulates over time and can materially impact PnL. Spikes often occur during extreme sentiment, creating opportunities for contrarian strategies.
A trader avoids paying high positive funding by switching from a long perpetual to spot BCH, reducing carry costs.
All terms and definitions may update as the Cryptionary improves.