Funding Rates Explained: The Hidden Cost of Perps
The funding rate is the mechanism that keeps perpetual futures tethered to the spot price even without expiration. It is also a flow of payments between longs and shorts that, over long holding periods, can meaningfully help or hurt your returns.
How often is funding paid?
On Hyperliquid, which powers Tenbagger, funding is paid hourly. Some exchanges use 8-hour intervals.
Is funding a fee paid to the exchange?
No. Funding is a cash flow between longs and shorts — a zero-sum transfer. The exchange facilitates settlement but doesn't keep it. Trading fees (taker/maker) are separate.
Does funding affect liquidation price?
Yes. Accumulated unfavorable funding reduces collateral and pulls the liquidation price closer. Favorable funding adds to collateral and pushes liquidation further away.
Can I earn money from funding alone?
Yes — through delta-neutral carry trades: short the perp and buy an equivalent spot to collect funding while immune to price. It requires careful execution and awareness of funding volatility.
Why is funding sometimes negative?
Negative funding means shorts are paying longs, which happens when the perp trades below spot. Typically this occurs after panic shorting or sharp drawdowns when short positioning is overcrowded.