# Funding Rate

> A periodic payment between long and short perpetual futures traders that keeps the contract close to spot.

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Source: What The Block! Dictionary v1.0 (last updated 2026-04-25), browsable at https://wtb.fudfomo.co.

## Definition

The funding rate is the mechanism that keeps a perpetual futures contract anchored to the underlying spot price. When the perp trades above spot, longs pay shorts; when it trades below, shorts pay longs.

Payments happen every few hours and are calculated as a percentage of position size. A high positive funding rate signals that traders are aggressively long. A persistently negative one signals heavy bearish positioning.

## Related terms

- [Perpetual Futures](https://business.fudfomo.co/glossary/perpetual-futures): A futures contract with no expiry date. Common in crypto, kept in line with the spot price by funding payments.
- [Leverage](https://business.fudfomo.co/glossary/leverage): Trading with borrowed funds, so a small move in the price has a much bigger effect on your position.
- [Futures](https://business.fudfomo.co/glossary/futures): A contract to buy or sell an asset at a fixed price on a future date.
- [Basis](https://business.fudfomo.co/glossary/basis): The difference between the spot price of an asset and its futures price.

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