What is a Funding Rate?
The funding rate is a periodic fee paid between long and short traders in perpetual futures contracts, based on the difference between the contract's market price and the spot price. When the market trend is bullish, the funding rate turns positive and may increase over time. In this scenario, long position holders pay funding fees to short position traders. Conversely, in a bearish market, the funding rate becomes negative, meaning shorts pay longs.
This mechanism ensures that the perpetual contract price stays aligned with the underlying spot market, preventing significant deviations over time.
Why is the Funding Rate Important?
The primary role of the funding rate is to narrow the price gap—often referred to as "price convergence"—between the perpetual contract market and the corresponding spot market.
Unlike traditional futures, perpetual contracts have no expiration date. Traders can hold positions indefinitely unless they get liquidated. This structure makes perpetual contracts behave similarly to spot trading.
To maintain price alignment with the index price, cryptocurrency exchanges use the funding rate mechanism.
How is the Funding Rate Calculated?
The funding amount is determined using the following formula:
Funding Amount = Position Notional Value × Funding Rate
(Position Notional Value = Mark Price × Number of Contracts Held)
Note that Binance does not charge any fees from the funding rate. The entire amount is transferred directly between users.
Funding payments occur every 8 hours at 00:00 UTC, 08:00 UTC, and 16:00 UTC. You will pay or receive funding only if you hold a position at the exact funding timestamp. If you close your position before that time, you will neither pay nor receive funding.
There is a 15-second tolerance around the funding time. For example, if you open a position at 08:00:05 UTC, you may still be charged or receive funding.
You can check the current funding rate and the countdown to the next funding time on the Binance Futures trading interface, above the price chart.
Note: The displayed funding rate is an estimate based on the last 8 hours of data and is not the final rate. For instance, at 09:00 UTC+8, the rate reflects data from 01:00 to 09:00 UTC+8.
What Factors Determine the Funding Rate?
The funding rate is influenced by two components: the interest rate and the premium.
The premium explains why the perpetual contract’s price converges toward the spot price. Binance uses a fixed interest rate, assuming that holding cash yields higher interest than holding Bitcoin. By default, the interest rate is set at 0.03% per day (or 0.01% per 8-hour funding interval). This rate may be adjusted based on market conditions such as the federal funds rate.
During high volatility, the perpetual contract price may diverge significantly from the mark price. In such cases, a premium index is used to bring the two prices closer. The premium index is calculated per contract using the following method:
Premium Index (P) = [Max(0, Impact Bid Price – Price Index) – Max(0, Price Index – Impact Ask Price)] ÷ Price Index
- Impact Bid Price = Average price to buy the Impact Margin Notional (IMN) at the bid price
- Impact Ask Price = Average price to sell the IMN at the ask price
- The Price Index is a composite value based on a basket of spot markets, weighted by trading volume.
The Impact Margin Notional (IMN) is the notional amount available to trade with $200 worth of margin. For USDT-margined contracts, it’s based in USDT; for coin-margined, in USD.
IMN = 200 USDT ÷ Initial Margin Ratio at the Highest Leverage
For example, if the BTCUSDT perpetual contract offers 125x leverage with an initial margin ratio of 0.8%, the IMN would be 25,000 USDT. The system checks the order book every minute for this amount to determine the average impact bid or ask price.
👉 Explore real-time funding rate tools
How to Check Real-Time and Historical Funding Rates
To review current and past funding rates, navigate to Contract Details → Funding Rate History within the Binance Futures platform. Alternatively, use the dedicated historical funding rate page.
How to Set Up Funding Rate Alerts
You can configure notifications to alert you when the funding rate reaches a certain threshold. Follow these steps:
- Log in to your Binance account.
- Go to Derivatives → USDT-Margined Futures.
- Click the Preferences icon (next to Grid Trading).
- Select the Notification Settings tab.
- Toggle on "Funding Rate Trigger." You can set a custom threshold between 0.0001% and 0.75%. The default is 0.25%.
- Click Confirm to save your settings.
Important: Notifications may be sent via email, SMS, or in-app alerts. This is a risk-warning feature, and Binance does not guarantee instant delivery. Network congestion or poor connectivity may delay or prevent alerts. Binance reserves the right to send notifications but is not obligated to do so.
Frequently Asked Questions
What happens if I don’t have a position at the funding time?
If you hold no position at the exact funding timestamp, you will not pay or receive any funding—even if you held a position earlier in the interval.
Can the funding rate be negative?
Yes. A negative funding rate means short traders pay long traders. This typically occurs in bearish markets when the perpetual contract price trades below the spot price.
How often is the funding rate updated?
The funding rate is recalculated and applied every 8 hours. The displayed rate is an estimate that updates in real-time based on recent market data.
Is the funding rate the same for all contracts?
No. Each perpetual contract (e.g., BTCUSDT, ETHUSDT) has its own funding rate based on supply, demand, and market conditions for that asset.
Why did I receive a funding payment even though I just opened my position?
If you opened a position less than 15 seconds before the funding time, you may still be included in the funding payment cycle due to the 15-second tolerance window.
Where can I learn more about leverage and margin?
For more details on leverage tiers and margin requirements, visit the Binance Futures guide on leverage and margin.