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Funding

Funding rates for crypto perpetual contracts are a mechanism that is used to ensure the price of the contract stays close to the underlying value.

How Funding Works​

The funding rate is a periodic fee that is paid by one side of the contract (either long or short) to the other side. Funding is purely peer-to-peer and no fees are collected on the payments.

The rate is calculated based on the difference between the contract's price and the reference value. For consistency with CEXs, the interest rate component is predetermined at:

  • 0.01% every 8 hours
  • 0.00125% every hour
  • 11.6% APR paid to short

Premium Component​

The premium component fluctuates based on the difference between the perpetual contract's price and the underlying value:

  • If the contract's price is higher than the oracle price, the premium and hence the funding rate will be positive, and the long position will pay the short position
  • If the contract's price is lower than the spot price, the funding rate will be negative, and the short position will pay the long position

Payment Schedule​

The funding rate on Hyperliquid is paid every hour. The funding rate is added or subtracted from the balance of contract holders at the funding interval.

Purpose​

Funding rates are designed to prevent large price disparities between the perpetual contract and the underlying asset. When the funding rate is high, it can incentivize traders to take the opposite position and help to bring the contract's price closer to the reference value of the underlying asset.

For more details, see: Hyperliquid Trading Funding