If you hold a perpetual contract position past a certain point in time, you might notice your account balance changed slightly — a bit more or a bit less. That's not a bug — it's the funding rate at work.
Why the Funding Rate Exists
Perpetual contracts have no expiration date, which means their price could theoretically drift further and further from the spot price. To keep the contract price anchored to spot, exchanges created the funding rate mechanism — periodic payments between longs and shorts that pull the price gap back in line.
In simple terms: it's a balancing tool that keeps the contract price from detaching from the spot price.
Positive and Negative Rates
- Positive rate (e.g., +0.01%): There are more longs than shorts, so long holders pay short holders. If you're holding a long position, you pay; if you're short, you receive
- Negative rate (e.g., -0.01%): There are more shorts than longs, so short holders pay long holders. The direction is reversed
Rates typically fluctuate between -0.05% and +0.1%, though they can spike higher during extreme market conditions.
Settlement Every 8 Hours
Binance settles the funding rate three times daily: at 00:00, 08:00, and 16:00 UTC+8. You only pay or receive funding fees if you hold a position at these exact settlement times.
If you open a position at 07:59, you'll be charged at 08:00. If you open at 08:01, the next settlement isn't until 16:00, so you're unaffected in between.
Formula: Funding Fee = Position Notional Value x Funding Rate
Example: You're holding a long position worth 10,000 USDT in notional value, and the current rate is +0.01%. At settlement, you pay 10,000 x 0.01% = 1 USDT.
Impact on Trading Strategy
The funding rate is part of your cost of holding a position. If you're long and holding through a period of positive rates, you're paying every 8 hours — and it adds up. Some traders specifically go long during negative rates and short during positive rates to earn extra income from the funding payments.
How to Check Rate Data
On the Binance futures trading page, the trading pair information bar displays the current funding rate and a countdown to the next settlement. Click on the rate to view the historical funding rate chart. You can also check the rate summary for all trading pairs on the contract data page at the Binance website.
Risk Warning: Funding rates add to your holding costs, and rates can spike during extreme market conditions. Before holding positions long-term, assess how cumulative funding fees will impact your returns.