~/markets/derivatives $ cat funding-rate-kak-chitat.md
Funding rate: the payment that exposes the whole market's skew
A perpetual future (perp) has no expiry date - and to keep its price from drifting off spot, exchanges invented funding: a periodic payment between longs and shorts.
Mechanics
The perp trades above spot (the market is skewed long) - funding is positive: longs pay shorts, nudging prices toward equilibrium. The perp trades below - the reverse. The payment is charged every 8 hours (on most venues) on positions, not orders. In essence funding is the price of a direction's popularity: you pay to stand in the crowd.
How to read it
- Chronically high positive funding - the market is overloaded with leveraged longs: fuel for a long squeeze. Persistently negative - the crowd is short, a short squeeze is brewing.
- Funding against the price move - the tastiest signal: price rising on negative funding = a spot-driven rally, the shorts will burn.
- Extremes work contrarian: historical funding peaks coincide with local tops and bottoms more precisely than most oscillators.
Our engine samples majors' funding continuously - live numbers in the markets section, spikes flagged in the feed.