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How to Read Crypto Funding Rates Before Trading Perpetual Futures

Crypto funding rates show which side of a perpetual futures market is paying the other side and help keep the perpetual price close to the spot market. A positive rate normally means longs pay shorts, while a negative rate means shorts pay longs. Before opening a perpetual position, check the current rate, its recent trend, the position size, the funding interval, and open interest rather than using funding as a standalone buy or sell signal.

What Is a Crypto Funding Rate?

A funding rate is a periodic payment between long and short traders in a perpetual futures contract.
Perpetual futures do not have a normal expiry date, so exchanges use funding to help keep the contract price close to the underlying spot or index price. When the perpetual trades above the reference price, the funding rate is generally positive and longs pay shorts.

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