Funding Rate

The funding rate is a mechanism used by perpetual futures exchanges to keep contract prices aligned with spot prices. When longs outweigh shorts, longs pay shorts (positive funding); when shorts dominate, shorts pay longs (negative funding). Funding rates are paid every 8 hours on most exchanges. Extreme positive funding is a classic sign of overleveraged longs and often precedes sharp corrections; deeply negative funding can signal bearish exhaustion and potential short squeezes.