Here's the short answer: the funding rate is a fee that longs and shorts on a perpetual contract pay each other, designed to keep the perpetual futures price anchored to the spot price. Binance settles it every 8 hours (at 08:00, 16:00, and 00:00 Beijing time). When the funding rate is positive (longs pay shorts), long positions get charged every 8 hours; when it's negative, it's the other way around. BTC's long-term average is roughly +0.01% per 8-hour period, meaning a long position gets charged around 11% cumulatively over a year. Start at the Binance Official Site, Android users can go through the Official Binance App, and iPhone users should check the iOS Installation Guide.
Below we'll cover how the funding rate works, how it's calculated, its typical range, and strategies for using it to your advantage.
A perpetual contract is essentially a synthetic product with no underlying asset to anchor it. Without something to hold it in check, the perpetual price could drift far away from the spot price. The funding rate is the mechanism Binance — and every perpetual futures exchange — uses to force the perpetual price to stay anchored to spot.
The logic:
When the perpetual price is higher than the spot price (the market is overheating on the bullish side): the funding rate turns positive, and longs get charged to pay shorts. Holding a long position becomes more expensive, so some longs close their positions → the perpetual price falls back toward spot.
When the perpetual price is lower than the spot price (the market is overly bearish): the funding rate turns negative, and shorts get charged to pay longs. Holding a short position becomes more expensive → the perpetual price rises back toward spot.
This is a market-balancing mechanism, not a way for Binance to profit from it (Binance actually only takes a very small cut, under 5% of the funding fee).
It's settled every 8 hours, and the amount charged each time = your position value × the current funding rate.
Example: on the BTC/USDT perpetual contract, the funding rate is +0.0100% (per 8-hour period), and you're holding a long position with a notional value of 50,000 USDT.
Charged every 8 hours: 50,000 × 0.0100% = 5 USDT
Over 24 hours (3 settlements): 5 × 3 = 15 USDT
Over 30 days: 15 × 30 = 450 USDT
If your margin is 5,000 USDT (10x leverage), that 450 USDT amounts to 9% of your margin.
In other words, even if your direction is right and price doesn't move at all, your pure funding rate cost over 30 days is still 9% of your margin.
Binance perpetual contracts settle every 8 hours, at these UTC times:
Things to keep in mind:
The funding rate varies enormously depending on the coin and market conditions.
BTC/USDT perpetual:
ETH/USDT perpetual: close to BTC, sometimes slightly higher.
Major altcoins:
Mid-cap altcoins:
Newly listed coins (high hype):
| Funding Rate | 8-Hour Cost (10x Leverage) | 30-Day Cumulative |
|---|---|---|
| ±0.005% | 0.05% of margin | 4.5% of margin |
| ±0.01% | 0.1% of margin | 9% of margin |
| ±0.05% | 0.5% of margin | 45% of margin |
| ±0.1% | 1% of margin | 90% of margin |
| ±0.5% | 5% of margin | 450% of margin (impossible to hold that long) |
Real-time: next to the trading pair's name on the futures trading page, you'll see the "Next Funding Rate" and a countdown timer.
Historical data:
Go to "Futures Info" → "Funding Rate History" to see the funding rate trend for any coin over the past 7 to 90 days.
On the Binance website: "Derivatives" → "Funding Rate" gives you an overview of current rates across all trading pairs, making it easy to filter and compare.
Strategy 1: Reduce your holding time
When the funding rate stays elevated for a while, avoid holding a position long-term. Trade intraday to avoid multiple settlements.
Strategy 2: Go the opposite direction (to collect the funding fee)
If BTC's funding rate has been sitting at +0.05% for a while, that means longs get charged 0.05% every 8 hours. Shorting BTC in this scenario nets you 0.15% a day in funding income (×3 settlements). But this only works if you can stomach BTC's price swings.
Strategy 3: Hedge spot against perpetual (basis arbitrage)
A classic arbitrage strategy:
This strategy typically yields 1-3% monthly, which looks small but carries low risk (as long as the coin itself doesn't crash to zero). Professional arbitrage teams and quant funds run this long-term.
Beginners shouldn't attempt this casually — it requires understanding the concept of basis, precisely controlling your hedge ratio, and being able to handle extreme market conditions.
Strategy 4: Use delivery futures instead of perpetual
Delivery contracts have no funding rate — they settle at the settlement price on expiration. If you plan to hold a position long-term for 1-3 months, a delivery contract might be cheaper than a perpetual one.
Reason 1: Market sentiment. When the market is extremely bullish, longs are willing to pay a high funding rate to keep their positions, pushing the funding rate up. It's the reverse when the market is extremely bearish.
Reason 2: Arbitrageurs. When the funding rate gets too high, arbitrageurs take the opposite side and push it back toward equilibrium.
Reason 3: News and events. Events like a Bitcoin spot ETF approval or an SEC lawsuit against a coin can instantly push the funding rate to an extreme.
Reason 4: Leverage imbalance. If long-side leverage significantly outweighs short-side leverage at a given moment, the funding rate gets pushed up.
A few details worth noting:
When the funding rate is positive: longs pay shorts
When the funding rate is negative: shorts pay longs
When the funding rate is zero: nobody pays or receives (this is rare)
Getting paid is a real possibility, but don't open a position purely to collect the funding fee. The funding income is only a few basis points, while the price risk is several percentage points.
BTC, ETH: the most stable. The funding rate tends to hover around ±0.01% long-term.
Major altcoins: moderate volatility. Can stay at +0.05% for several days at the top of a bull market.
Second-tier altcoins (DOGE, SHIB, etc.): highly volatile.
Newly listed coins: the funding rate can be extremely unstable in the first week — avoid trading perpetuals on brand-new coins.
Coin-M perpetuals: calculated independently from USDⓈ-M perpetuals. Coin-M funding rates tend to run higher (due to lower liquidity).
Misconception 1: Thinking Binance collects the funding rate. In reality, it's paid between longs and shorts directly, with Binance only taking a very small cut.
Misconception 2: Thinking it's charged once a day. It's actually every 8 hours, three times a day.
Misconception 3: Thinking low leverage means a smaller funding rate impact. The funding rate is calculated based on position value, not margin. A 10x position with 1,000 USDT margin pays exactly the same funding fee as a 1x position with 1,000 USDT margin (both are calculated on the same 1,000 USDT position value).
Misconception 4: Thinking you can avoid it forever by timing settlements. Closing before settlement avoids one charge, but reopening still means paying the next one. Unless you never trade futures at all, the funding rate is unavoidable.
Misconception 5: Thinking the funding rate doesn't matter. A cumulative cost of 9-15% over 30 days is a massive drag on most trading strategies.
Q: Is the funding rate fixed for each 8-hour period? A: There's one value per 8-hour period, but it's calculated in real time right before each settlement. The "Next Funding Rate" shown on the Binance trading page is an estimate — the final number is calculated based on actual data at the moment of settlement.
Q: What's the maximum the funding rate can reach? A: In theory, there's no upper limit, but Binance caps extreme values (generally ±0.75% per 8-hour settlement).
Q: Can I avoid it by closing my position 1 second before settlement? A: Yes. Binance determines the charge based on whether you're holding a position at the exact moment of settlement. But timing needs to be precise — leaving a buffer of 30 seconds to 1 minute is safer.
Q: Where does the money deducted for the funding rate go? A: It's transferred directly to users holding the opposite position. For example, money charged from longs gets transferred to everyone holding a short position at that time (distributed proportionally to position size).
Q: Do delivery contracts also have a funding rate? A: No. Delivery contracts anchor to spot through their expiration settlement, so they don't need a funding rate.
Q: How can I anticipate a high funding rate in advance? A: Watch the gap between the spot and perpetual price. When the perpetual trades at a 0.5%+ premium, the next funding rate is very likely to be positive and elevated; a large discount usually points to a negative rate.
Q: Is the funding rate useful as a basis for strategy? A: It can help, but shouldn't be relied on alone. The funding rate reflects market sentiment, and sentiment can reverse suddenly.
The funding rate is perpetual futures' "invisible cost," and beginners usually only notice it after getting burned. Check the next funding rate before opening a position, and calculate the cumulative cost before holding long-term — it can help you avoid a lot of pitfalls.