By Keel Research Team · Updated May 13, 2026
A funding rate is a periodic payment between perpetual-futures longs and shorts that anchors the contract price to spot. Positive funding: longs pay shorts. Negative: shorts pay longs. Hyperliquid settles it hourly. The mechanism is small per period and meaningful at scale.
Funding is the mechanism that holds perpetual-futures contracts to the price of their underlying asset. It exists because perpetuals — unlike traditional futures — never expire. Without funding, there is nothing forcing convergence between the perp price and the spot index it tracks. Funding makes the divergence costly, and traders arbitrage it back into line.
Here is the math in one paragraph. Every funding period (hourly on Hyperliquid, every 8 hours on Binance), the protocol computes a rate based on how far the perp price has diverged from a spot-price oracle. If the perp trades above the oracle, longs pay shorts at that rate. If below, shorts pay longs. The rate scales with the divergence. Over time, the cost makes the crowded side close out, and the perp price returns to spot.
The per-period funding payment is simple:
funding_payment = position_size × funding_rate × periodIf you hold a $10,000 long position and the hourly funding rate is 0.01% (1 basis point), you pay $1.00 per hour for as long as the position is open and funding stays positive. Over 24 hours, that's $24. Over a week, $168. The annualized projection — rate × 8760 — would be about 87.6% APR.
That annualized number is useful for comparing carry across pairs, but it almost never materializes. Funding rates flip routinely. A pair carrying 100% APR for a few hours can flatten or invert when a news event shifts positioning. Treat the annualized number as order of magnitude, not a projection.
The funding calculator projects total cost for any combination of side, position size, hold duration, and funding rate. Useful for sizing how long you can hold a position in a particular regime.
The sign of the funding rate is a market-positioning signal.
Persistent positive funding on a specific name (sustained over many hours or days) is often a contrarian signal — it means long positioning has gotten crowded, which historically precedes flushes. The carry trade explicitly profits from this dynamic by being short the crowded side.
Three common applications:
Three places to look at funding mechanics on real data:
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A funding rate is a small periodic payment that moves money between perpetual-futures longs and shorts to keep the contract price tied to the underlying spot market. When the perp trades above spot, longs pay shorts. When it trades below, shorts pay longs. The rate is small per period but compounds over multi-day holds.
Traditional futures contracts have an expiration date — the contract converges to spot at expiry by definition. Perpetuals never expire, so there is no natural mechanism forcing convergence. Funding is the substitute: it makes it costly to be on the side that pushes the perp away from spot, which anchors the price.
Hyperliquid settles funding every hour. Most centralized exchanges (Binance, Bybit, OKX) settle every 8 hours. Some settle every 4 hours. The shorter the interval, the faster funding responds to regime shifts — useful for carry strategies, harder for longs trying to wait out a positive-funding spike.
If you're long, you pay shorts 0.01% of your position size every hour. On a $10k long position that's $1/hour — $24/day — annualized roughly 87.6%. If you're short, you receive that amount. The annualized number sounds extreme because it usually doesn't persist; funding flips routinely. But over a multi-day hold in a sustained positive-funding regime, the cost is real.
The classic trade is the "carry trade": short the perp when funding is heavily positive, hedge directional exposure with spot (or another long perp), collect funding while market-neutral. Profit = funding received − hedge cost. Risks include funding flipping negative, basis divergence between perp and spot, and liquidation cascades. See the funding-carry strategy template for a worked example with real backtest numbers.
Extreme readings cross 1 bps per hour (~87% APR) during crowded directional positioning, with rare cases above 5-10 bps/hour on smaller pairs around news or liquidations. The Funding Leaderboard shows live top-30 ranked by current 1h rate, including annualized APR if the rate held for a year.
Top-30 HL perps by current funding rate. Real-time view of which pairs are paying the most carry.
Project the total funding cost or income of a position over hours, days, or weeks.
Documented strategy with a real Hyperliquid backtest: Sharpe 2.17, +79.6% over 20 months.