Funding Rate
A periodic payment between long and short perpetual futures holders that keeps the contract price aligned with spot.
The funding rate on perpetual futures is a recurring fee (typically every 8 hours) paid by one side of the market to the other. When the perpetual trades at a premium to spot, longs pay shorts; when at a discount, shorts pay longs. This creates an arbitrage incentive that keeps the perpetual price tethered to spot.
Funding rates are quoted as a percentage per 8-hour period. An annualised rate of 100% means longs pay 100% of their position value per year just in funding — a meaningful drag on directional positions in high-momentum markets.
Basis traders earn the funding rate by going long spot and shorting the perpetual (or vice versa), capturing the spread without directional exposure. This strategy is known as a cash-and-carry trade or 'delta-neutral farming'.