If you trade futures, you'll see the term "funding rate" constantly — but many don't understand what it is, how it's calculated, or when it's deducted. Failing to understand funding rates could mean unknowingly losing money.
What Is the Funding Rate?
Perpetual contracts have no expiry date. To keep contract prices close to spot prices, Binance uses a funding rate mechanism. Simply put, longs and shorts pay each other:
- Positive funding rate: Longs pay shorts
- Negative funding rate: Shorts pay longs
This is a market self-regulating mechanism. When too many people are long, the rate turns positive, increasing the cost of being long to encourage shorting — and vice versa.
If you're interested in futures trading, register on Binance first to learn the basics.
When Is It Charged?
Binance perpetual contracts charge funding fees every 8 hours at:
- UTC 00:00 (Beijing 08:00)
- UTC 08:00 (Beijing 16:00)
- UTC 16:00 (Beijing 00:00)
You only pay or receive funding fees if you hold a position at these exact times. If you close your position before the charging time, you skip that round.
How to Check the Current Funding Rate
Method 1: Futures trading page At the top of the futures interface, next to the trading pair name, the current funding rate and countdown to the next charge are displayed.
Method 2: Funding rate page App -> Futures -> More -> Funding Rate. Here you can see current and historical rates for all trading pairs.
Method 3: API query
Use the /fapi/v1/fundingRate endpoint to retrieve historical funding rate data.
How Is the Funding Fee Calculated?
Funding fee = Position value x Funding rate
Example:
- You're long BTC with a position value of 10,000 USDT
- Current funding rate is 0.01% (positive)
- You pay: 10,000 x 0.01% = 1 USDT
If the rate is -0.01% (negative), you as a long actually receive 1 USDT.
Note: the funding fee is calculated on position value, not margin. With 10x leverage, 1,000 USDT margin means a position value of 10,000 USDT.
Impact on Trading
Short-term traders If your holding period is under 8 hours, you might not pay any funding fees at all. Just close before the charging time.
Medium/long-term traders Holding for days or weeks means fees accumulate. Assuming a sustained rate of 0.01%:
- 3 times/day x 0.01% = 0.03%/day
- Roughly 0.9%/month
- With 10x leverage, monthly funding fees eat about 9% of margin
That's a significant cost. Long-term futures positions must account for funding fees.
Funding Rate Strategies
Rate arbitrage When the funding rate stays highly positive (e.g., >0.05%), consider:
- Buy BTC on the spot market
- Short BTC on futures (equal hedge)
- Spot and futures P&L offset each other
- Steadily collect funding fees as the short side
This is a market-neutral strategy with lower risk but limited returns.
Avoid high-rate periods If rates are abnormally high (e.g., above 0.1%), market sentiment is extreme. Opening positions then requires extra caution since your holding costs are steep.
Reading Historical Rate Trends
Historical rates can gauge market sentiment:
- Persistently positive: Market is generally bullish
- Persistently negative: Market is generally bearish
- Sudden sharp increase: Potentially overheating signal
- Flip from positive to negative: Sentiment may be shifting
Rate Differences Across Coins
Major coins (BTC, ETH) tend to have fairly stable rates, typically between -0.01% and 0.03%.
Smaller coins have more volatile rates, potentially reaching 0.1% or higher. Pay especially close attention to rates when trading altcoin futures.
Funding rates are an easily overlooked but significant factor in futures trading. Include them in your cost calculations to accurately assess whether a trade is worth taking.