Question 1

What is a funding rate in perpetual futures?

Accepted Answer

A funding rate is a periodic payment exchanged between long and short traders in perpetual futures markets. Unlike traditional futures contracts that have expiry dates, perpetual futures use funding rates to keep the contract price anchored to the spot price. When the perpetual price is above spot (bullish market), the funding rate is positive and longs pay shorts. When the perpetual price is below spot (bearish market), the funding rate is negative and shorts pay longs. Funding payments are typically exchanged every 8 hours.

Question 2

How often are funding rates charged on Hyperliquid?

Accepted Answer

On Hyperliquid, funding rates are settled every 8 hours, which means there are 3 funding periods per day. The funding rate displayed is the rate per 8-hour period. Your funding payment for each period equals your position size multiplied by the funding rate. The rate can change each period based on market conditions, so the actual cost of holding a position over days or weeks can vary from the estimate provided by this calculator, which assumes a constant rate.

Question 3

When does the funding rate help or hurt my position?

Accepted Answer

For long positions: a positive funding rate means you pay funding (it costs you money), while a negative funding rate means you receive funding (you earn money). For short positions, it is reversed: a positive funding rate means you receive funding, and a negative funding rate means you pay. In bullish markets, funding tends to be positive (costly for longs), and in bearish markets, funding tends to be negative (costly for shorts). Some traders actively seek to trade on the side that receives funding as part of their strategy.

Question 4

How do funding rates affect my overall trade profitability?

Accepted Answer

Funding rates can significantly impact the profitability of trades held for extended periods. For example, a 0.01% per 8h funding rate on a $100,000 position costs $10 every 8 hours, or $30 per day, or roughly $900 per month. Over 30 days, this means the price would need to move at least 0.9% in your favor just to break even on funding costs alone. This is why many traders factor in estimated funding costs before entering positions, especially for swing trades and longer-term holds.

Question 5

What are some strategies to manage funding costs?

Accepted Answer

Several strategies can help manage funding costs: 1) Time your entries to enter on the funding-receiving side when possible. 2) Monitor funding rate trends and close positions before high funding periods. 3) Use funding rate arbitrage by going long on one exchange and short on another to capture the rate differential. 4) Consider shorter holding periods during high funding rate environments. 5) Factor funding costs into your break-even analysis before entering a trade. 6) Use the funding rate calculator to understand the total cost before committing to a position.

Question 6

What is a typical funding rate and how does it change?

Accepted Answer

The baseline or neutral funding rate on most exchanges is 0.01% per 8 hours (approximately 10.95% annualized). During calm markets, rates tend to hover near this level. In strongly bullish markets, funding can spike to 0.1% or higher per 8 hours (over 100% annualized), making it very expensive to hold long positions. In bearish markets, funding can go negative, making it costly for shorts. Extremely high or low funding rates often indicate crowded positioning and can signal potential reversals, as the cost of maintaining the popular trade becomes unsustainable.

Funding Rate Calculator

Bullish Market (Positive Rate)

Bearish Market (Negative Rate)

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