Funding Rate
Periodic payments between long and short traders that tether perpetual futures to spot price — and reveal crowd positioning.
Perpetual futures never expire, so exchanges use funding to keep them glued to spot: every few hours, one side pays the other. Perps trading above spot → longs pay shorts (positive funding); below → shorts pay longs. The rate floats with the imbalance.
Beyond mechanics, funding is a positioning X-ray: persistently high positive rates mean crowded, paying-to-stay longs — historically fuel for liquidation cascades on any dip; deeply negative funding marks fear so one-sided it often precedes bounces. Extremes matter, midrange is noise. For non-traders, it’s still worth knowing that leveraged crowding, visible in funding, drives many of crypto’s sharpest hourly moves.