Funding rate
A periodic payment between long and short traders on a perpetual future that pushes its price toward the spot price.
The funding rate is a periodic payment exchanged directly between traders holding long and short positions in a perpetual future. Exchanges usually calculate it every few hours. When the perp trades above spot, the rate is positive and longs pay shorts; when it trades below spot, shorts pay longs. The payment goes between traders, not to the exchange, and that is what makes it a balancing mechanism.
On our site, funding is shown as a percentage per interval and often as an annualized figure. A persistently high positive rate suggests crowded long positioning; a persistently negative rate suggests the reverse.
Traders watch funding because it is a direct cost of holding a leveraged position. Over several weeks, a steady rate can outweigh the price move a position is expected to earn.
Worked example (illustrative numbers, not real data): funding is 0.01 percent per 8 hours on a position with 100,000 dollars of notional. The long pays 0.01 percent of 100,000, or 10 dollars per interval, which is about 30 dollars per day at three intervals.