Funding Rate
A small payment between long and short traders that keeps perpetual futures prices close to the spot market.
The Funding Rate is a periodic payment made between traders
in perpetual futures markets — to keep prices close to the real (spot) price.
It’s what keeps perpetual contracts (which never expire)
balanced between buyers (longs) and sellers (shorts).
How it works
- When most traders are long, the funding rate becomes positive,
so longs pay shorts to keep positions open. - When most are short, the funding rate turns negative,
and shorts pay longs instead.
This mechanism keeps the futures price close to the spot price.
Why it matters
- High positive funding = bullish sentiment (too many longs).
- Negative funding = bearish sentiment (too many shorts).
- Traders use funding data to spot market imbalance and avoid traps.
💡 Lanzo Tip
If you’re holding a perpetual futures position for days,
funding fees can add up fast — always check the rate before opening a trade ⚡