How it works
Every 8 hours (on most venues) the exchange measures the gap between the perpetual contract price and the spot index. If perpetual trades above spot, longs pay shorts. If below, shorts pay longs. The payment scales with the gap size, position size, and a small fixed interest component. Funding is exchanged between traders, not paid to the venue.
Example
BTC perpetual trades at $43,500 while spot is at $43,000. Funding rate that period is +0.04 percent. You hold a 1 BTC long position. You pay $43,500 × 0.04 percent = $17.40 to the short side of the book. Held over a week (21 funding periods) at the same rate, that compounds to roughly $365 in funding cost.
Why it matters
Funding rate is a real cost or income line item that swing and position traders ignore at their peril. A persistently positive funding rate means longs are paying carry, eroding edge. Carry traders deliberately take the opposite side to harvest the funding payment, accepting directional risk in exchange.
