Funding Rate Mechanism
Funding Rate Mechanism
[Estimated reading time: 3 minutes]
Definition: Funding fees are periodic payments between long and short holders of perpetual futures positions. They keep the perpetual futures price aligned with the spot index price (price convergence).
Settlement cycle: Funding fees are settled every 8 hours at 12:00 AM, 08:00 AM, and 4:00 PM (UTC+8). The settlement cycle may differ for certain cryptocurrencies or under specific conditions.
How funding fees are paid and received by long and short holders
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When the funding rate is positive, long position holders pay funding fees to short position holders.
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When the funding rate is negative, short position holders pay funding fees to long position holders.
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Formula
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Description
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Funding fee = position value × funding rate
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Position value is the notional value of the position. A positive rate indicates a payment, while a negative rate indicates a receipt.
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Example: For a long BTCUSDT perpetual futures position worth 20,000 USDT, a funding rate of +0.01% results in a payment of 20,000 × 0.01% = 2 USDT, while a funding rate of −0.01% results in a receipt of 2 USDT.
Funding rate formula:
Funding rate (F) = clamp([P + clamp(I - P, -0.05%, 0.05%)] ÷ (8÷N), minimum funding rate, maximum funding rate)
Where:
I = Interest rate index, fixed at 0.01% (set uniformly by Bitget and unaffected by market fluctuations)
P = Average premium index, reflecting the spread between the futures price and the spot index price
N = Funding fee settlement cycle in hours, typically 8
Premium index P = [Max(0, impact bid price − index price) − Max(0, index price − impact ask price)] ÷ index price impact margin notional = 200 USDT × maximum leverage for the trading pair
Maximum funding rate = 0.75 × maintenance margin rate
Minimum funding rate = –0.75 × maintenance margin rate
Impact margin notional refers to the value of a futures position that can be opened with a fixed margin amount at the maximum leverage. It is used to measure the actual impact of order book depth on the price.
Note: Delivery futures don't incur funding fees because they settle at expiration and don't need a funding rate to stay aligned with spot prices. This applies to both USDT-M andCoin-M delivery futures. Coin-M delivery futures incur only maker and taker transaction fees.
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