Funding Rate
Periodic fee between long and short positions on perpetual futures — measures sentiment.
Funding rate is a mechanism used by perpetual futures to keep the futures contract price close to the spot price of the cryptocurrency. Every 8h, users with long or short positions pay each other.
How it works:
•Positive funding rate: futures price is above spot price → long pays short
(Market sentiment: bullish, many buying)
•Negative funding rate: futures price is below spot price → short pays long
(Market sentiment: bearish, many shorting)
How to use funding rate in analysis:
•Extremely high positive FR (>0.1%) = overvaluation signal, potential reversal
•Negative FR over extended period = whale accumulation, potential rise
•FR near zero = neutral sentiment
Funding rate as passive income: Strategy "funding rate arbitrage": buy spot BTC, sell BTC futures → neutral delta position. Earn funding rate without direct price exposure. Risk: slippage, counterparty risk.