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What is Funding Rate?
The funding rate is a periodic payment between long and short traders in perpetual swaps. It keeps the perpetual price aligned with the spot price.
Full Explanation
Funding rates are exchanged every 8 hours between long and short positions on perpetual swap markets. Positive funding = longs pay shorts (market is bullish/overleveraged long). Negative funding = shorts pay longs (market is bearish/overleveraged short). Traders monitor funding rates to gauge market sentiment and find funding rate arbitrage opportunities. Extremely high positive funding often precedes crashes as overleveraged longs get liquidated.