If you've ever traded perpetual contracts, you've probably noticed a "funding rate" number next to your position. But what does it actually mean, and why does it matter?

In this guide, we'll break down everything you need to know about funding rates and how tools like FundingView (Funding View) help you profit from them.

Track funding rates in real-time with FundingView →

What Are Funding Rates?

Funding rates are a mechanism that keeps perpetual contract prices aligned with the underlying spot price.

Unlike traditional futures that expire on a specific date, perpetual contracts never expire. This creates a problem: without an expiration date forcing convergence, the perpetual price could drift away from the spot price indefinitely.

Funding rates solve this by creating periodic payments between long and short traders.

This is the core concept every Funding View user needs to understand to profit from funding rate arbitrage.

How Do Funding Rates Work?

The funding rate determines who pays whom:

Positive funding rate → Longs pay shorts
Negative funding rate → Shorts pay longs

This payment happens at regular intervals (every 1 hour or 8 hours, depending on the exchange).

FundingView displays all these rates in real-time across 10+ perpetual DEXs, making it easy to compare.

The Logic Behind Funding Rates

When the perpetual price trades above the spot price:

The funding rate becomes positive
Long positions pay short positions
This incentivizes traders to short, pushing the price down

When the perpetual price trades below the spot price:

The funding rate becomes negative
Short positions pay long positions
This incentivizes traders to long, pushing the price up

This self-correcting mechanism keeps the perpetual price anchored to spot. Funding View helps you track these movements across all major exchanges.

The Funding Rate Formula

The funding rate consists of two components:

1. Interest Rate Component

A fixed rate representing the cost difference between borrowing USD versus holding crypto. On most exchanges, this is set at 0.01% every 8 hours (approximately 11.6% APR), paid to shorts.

2. Premium Component

This fluctuates based on the price difference between the perpetual contract and the spot oracle price:

Premium = (Impact Price - Oracle Price) / Oracle Price

The final funding rate combines both:

Funding Rate = Premium + clamp(Interest Rate - Premium, -0.05%, 0.05%)

FundingView calculates all of this for you and displays the final annualized APR.

A Practical Funding Rate Example

Let's walk through a real calculation:

Given:

Spot (Oracle) Price: $10,000
Perpetual Impact Bid Price: $10,100
Interest Rate: 0.01% (fixed)
Your Position: 10 BTC long

Step 1: Calculate the Premium

Premium = ($10,100 - $10,000) / $10,000 = 1%

Step 2: Calculate the Clamped Difference

Clamped = clamp(0.01% - 1%, -0.05%, 0.05%) = -0.05%

Step 3: Calculate the Funding Rate

Funding Rate = 1% + (-0.05%) = 0.95%

Step 4: Calculate Your Payment

Payment = 10 BTC × $10,000 × 0.95% = $950

As a long holder with positive funding, you would pay $950 to short holders at this funding interval.

This is why Funding View users look for opportunities to be on the receiving side of funding!

Funding Rate Intervals by Exchange

Different exchanges use different funding intervals. FundingView normalizes all rates to hourly for easy comparison:

Exchange	Funding Interval	Track on FundingView
Hyperliquid	Every 1 hour	View Rates
Paradex	Every 1 hour	View Rates
Extended	Every 1 hour	View Rates
Lighter	Every 1 hour	View Rates
Vest	Every 8 hours	View Rates
Backpack	Every 8 hours	View Rates

Important: If an exchange shows an 8-hour rate but pays hourly, they divide the rate by 8 for each payment. Funding View handles these conversions automatically.

Key Things to Know About Funding Rates

1. Funding is Peer-to-Peer

The exchange doesn't take any fees from funding payments. It's purely a transfer between traders. This makes funding rate arbitrage a zero-sum game between longs and shorts.

2. Oracle Prices Matter

The spot price used in calculations comes from weighted median prices across major exchanges, not from a single source. FundingView tracks these oracle prices for accuracy.

3. Funding Caps Exist

Most exchanges cap funding rates to prevent extreme payments. Hyperliquid caps at 4% per hour, which is less aggressive than many CEXs.

4. Payment Calculation

Funding Payment = Position Size × Oracle Price × Funding Rate

Note that the oracle price (not mark price) is used to calculate the notional value.

Why Funding Rates Matter for Traders

For Position Traders

High funding rates can significantly eat into your profits if you're on the paying side. A 0.1% hourly rate compounds to 87.6% annually!

Always check FundingView before opening a position to understand the funding cost.

Check current funding rates →

For Arbitrage Traders

Different exchanges have different funding rates for the same asset. By going long on one exchange and short on another, you can capture the spread while remaining market-neutral.

This is exactly what FundingView (Funding View) helps you find.

Funding Rate Arbitrage Strategy

Here's the basic strategy that Funding View users employ:

Find an asset with high positive funding on Exchange A (using FundingView Dashboard)
Find the same asset with lower (or negative) funding on Exchange B
Go short on Exchange A (receive funding)
Go long on Exchange B (pay less funding)
Your positions hedge each other
You pocket the funding rate difference

The best part? You don't care if the price goes up or down. Your profit comes purely from the funding spread.

Example Arbitrage with FundingView

Let's say FundingView shows you:

BTC on Hyperliquid: +0.05% hourly (you receive this when short)
BTC on Extended: +0.01% hourly (you pay this when long)

Your strategy:

Short 1 BTC on Hyperliquid → Receive 0.05%/hour
Long 1 BTC on Extended → Pay 0.01%/hour
Net profit: 0.04%/hour = 350% APR!

Find these opportunities on FundingView →

How FundingView Helps You Track Funding Rates

FundingView (Funding View) is built specifically to help traders find funding rate opportunities:

Real-Time Dashboard

The FundingView Dashboard shows you:

Funding rates from 10+ perpetual DEXs
The APR spread between exchanges
Which side to take on each exchange

Historical Analysis

The History Explorer lets you:

See how funding rates evolved over time
Identify consistent opportunities vs temporary spikes
Backtest your arbitrage strategies

Strategy Recommendations

The Strategy Page automatically finds the best funding rate arbitrage opportunities and shows you exactly how to execute them.

Supported Perpetual DEXs on FundingView

Track funding rates across all major perpetual DEX platforms:

Hyperliquid - Highest liquidity perpetual DEX
Paradex - StarkWare-powered, fast settlement
Extended - High-performance trading
Lighter - Orderbook-based perpetuals
Vest - Community-focused exchange
Backpack - Solana ecosystem
Orderly - Cross-chain liquidity
Hibachi - Next-generation perpetuals

Get fee discounts on all these exchanges through our referral links.

Start Tracking Funding Rates Today

Understanding funding rates is essential for any perpetual contract trader. Whether you're managing your position costs or looking for arbitrage opportunities, FundingView (Funding View) gives you the data you need.

Ready to find funding rate opportunities?

🚀 Check out the FundingView Dashboard to compare rates across 10+ exchanges in real-time.

📊 Explore Top Strategies to find the best arbitrage opportunities.

📈 Analyze Historical Data to spot consistent patterns.

💰 Get Exchange Discounts with our exclusive referral links.

Want to learn more about Funding View? Read our guide: What is FundingView?

What is FundingView? - Platform overview
Is Funding Arbitrage Safe? - All risks explained
Earn Your First $100 - Beginner's tutorial
Paradex Review 2025 - Zero-fee exchange analysis
Spot/Perp Funding Arbitrage - Safer strategy
Crypto Funding Rate Glossary - 60+ terms explained

What Are Funding Rates? The Complete Guide for Perpetual Trading