What Is the Funding Rate? How Binance Futures Calculates This Fee
The funding rate is a fee settled every 8 hours between longs and shorts on Binance perpetual futures. This note uses real position data to walk through how the funding rate is calculated, when it's charged, which direction it flows, and how it affects your holding strategy.
The first time someone opens a Binance perpetual futures position, they often notice, 8 hours later, that their balance has mysteriously dropped or grown by a few dollars with no matching trade — just a single line reading "Funding." That's the funding rate. This time we ran a live test on the Binance official site with a small 1,000 USDT position, tracking funding fee deductions across 4 settlement cycles (8 hours each), and we're posting both the numbers and the calculation logic here. The short version: the funding rate is a mechanism unique to Binance perpetual futures, settled every 8 hours, paid directly between longs and shorts — it never goes into Binance's pocket. If the rate is positive, longs pay shorts; if negative, shorts pay longs.
Why perpetual futures need a funding rate
To understand the funding rate, you first need to understand the difference between perpetual futures and traditional futures.
Traditional futures have an expiration date — for example, the quarterly ES S&P futures contract on US equities automatically settles and delivers on a specific Friday in September. Under this mechanism, the futures price naturally converges toward the spot price (basis convergence).
Perpetual futures have no expiration date — in theory you can hold them forever. That raises a question: how does the perpetual futures price avoid drifting too far from the spot price? The answer is the funding rate — it acts as a "price anchor."
The mechanism works like this:
- When the perpetual futures price is above the spot price (market leaning bullish), the system makes longs pay shorts. Holding costs for longs rise, some traders exit, and the futures price falls back toward spot
- When the perpetual futures price is below the spot price (market leaning bearish), the system makes shorts pay longs. Holding costs for shorts rise, some positions close, and the futures price rises back toward spot
Through this "penalize the deviating side, reward the balancing side" mechanism, the perpetual futures price stays pinned near the spot price.
How the funding rate is calculated
Binance's funding rate formula is fairly complex, but in practice you only need to look at the final rate value. The rate for each trading pair is shown at the top of the futures page, usually looking something like this:
Funding Rate: 0.0100% / Countdown 03:24:18
This means the current pair's rate is 0.01%, with 3 hours, 24 minutes, and 18 seconds until the next settlement.
The actual fee calculation
The fee formula is simple:
Funding fee = position notional value × funding rate
Example: you hold a long position in BTC with a notional value of 1,000 USDT (regardless of leverage used — what matters is notional value), and the current rate is 0.01%.
- Funding fee = 1,000 × 0.01% = 0.1 USDT
If the rate is positive and you're long, 0.1 USDT is deducted. If you're short, you instead receive 0.1 USDT.
Real data from 4 settlements
We opened a long BTC USDT perpetual position with a notional value of 1,000 USDT and tracked it continuously for 32 hours (4 settlement cycles):
| Settlement time (Beijing) | Rate | Payer direction | My position | Amount charged |
|---|---|---|---|---|
| 04-26 16:00 | +0.0098% | Long pays short | Long 1,000U | -0.098 USDT |
| 04-27 00:00 | +0.0072% | Long pays short | Long 1,000U | -0.072 USDT |
| 04-27 08:00 | -0.0021% | Short pays long | Long 1,000U | +0.021 USDT |
| 04-27 16:00 | +0.0105% | Long pays short | Long 1,000U | -0.105 USDT |
Net spend across the 4 settlements was 0.254 USDT. That doesn't look like much, but it's the cost of a 1,000 USDT position over 32 hours — roughly 7% annualized. If you were using 10x leverage with only 100 USDT in actual margin, that's equivalent to your principal absorbing 70% in annualized funding costs, which is genuinely scary.
Settlement schedule
Funding rates for Binance's mainstream trading pairs settle every 8 hours, at fixed times:
| Beijing time | UTC time | Pairs covered |
|---|---|---|
| 00:00 | 16:00 | All |
| 08:00 | 00:00 | All |
| 16:00 | 08:00 | All |
A small number of special trading pairs (highly volatile new listings) may settle every 4 hours or even every 1 hour — Binance clearly labels this on the pair's detail page.
Note: only traders holding a position at the exact settlement timestamp pay or receive the funding rate. If you closed your position at 15:59, the 16:00 fee has nothing to do with you. This has given rise to a play called "dodging the rate" — closing a position seconds before settlement and reopening it seconds after, to avoid the fee. But this move requires paying open/close trading fees plus slippage twice, and in most cases it isn't worth it.
How to read the funding rate sign
Open the futures trading page on the Binance App or web:
Step 1: Find where the rate is displayed
Above the futures candlestick chart there's a row showing an orange number (the color varies by theme), formatted as Funding Rate 0.0100%. Next to it is a countdown to the next settlement.
Step 2: Read the sign
- Positive (e.g. 0.0100%): longs pay, shorts receive
- Negative (e.g. -0.0050%): shorts pay, longs receive
Step 3: Check the historical rate
Tapping that "Funding Rate" number jumps to a detail page showing the rate trend over the past 30 days or longer. This chart can reveal market sentiment — if the rate has stayed positive and kept climbing, it usually signals that the market is overly bullish, which often precedes a reversal.
What the funding rate means in practice
Meaning 1: a market sentiment indicator
A funding rate that's positive and rising means longs are willing to pay higher costs to stay long, signaling an overheated market. Historically, at nearly every market top, the BTC perpetual funding rate has hit extreme levels of 0.1% or even 0.3% (110%-330% annualized).
A negative rate signals excessive pessimism and often marks a bottom signal. But negative rates generally don't last long.
Meaning 2: cost of holding long-term
If you plan to hold a long futures position for an extended period (e.g. trend-following), the cumulative funding rate cost isn't negligible. Over the past year, the average BTC USDT perpetual funding rate has been around 0.005%-0.015%, or 5%-15% annualized. That means even if you called the direction correctly, you still need to cover this cost first.
A more professional approach: if you're bullish long-term, hold spot BTC instead of futures, avoiding funding rate drag entirely. Futures are better suited to short-to-medium-term trading.
Meaning 3: an arbitrage opportunity
The funding rate creates an opportunity known as "basis arbitrage": shorting a perpetual futures position while simultaneously holding an equal amount of spot. If the rate is positive, you collect the short-side fee every 8 hours, while gains/losses from spot price movement are hedged by the futures position. This delta-neutral strategy is a common "risk-free" (in practice, still exposed to liquidation risk and similar) income method used by institutions.
Rate caps and protection mechanisms
Binance sets upper and lower limits on the funding rate for mainstream pairs to prevent extreme scenarios:
| Pair type | Max single-settlement rate | Min single-settlement rate |
|---|---|---|
| BTC USDT perpetual | +0.05% | -0.05% |
| ETH USDT perpetual | +0.05% | -0.05% |
| Most altcoin perpetuals | +2% | -2% |
| High-volatility new-listing perpetuals | +0.75% | -0.75% |
The specific caps and floors are listed on each contract's "Contract Rules" page, where users can check the current limits for any trading pair.
Note that altcoin rate swings can be extreme — some meme coin contracts have seen single-settlement rates of +1%, which works out to 1% every 8 hours, or 1,095% annualized. Holding such a contract long-term is essentially slow financial suicide.
Funding rate vs. trading fees
Beginners often confuse the funding rate with futures trading fees. These are two different charges:
| Comparison | Funding rate | Futures trading fee |
|---|---|---|
| Paid to | The counterparty side (long/short) — not Binance | Binance platform |
| Trigger condition | Holding a position across a settlement time | Opening/closing a trade |
| Calculation basis | Position notional value | Trade amount |
| Standard rate | Floating, can be positive or negative | Fixed (Maker/Taker) |
| Frequency | Every 8 hours | Every trade |
| Avoidable | Yes, if you close before settlement | No |
The current futures trading fee for USDT perpetuals is Maker 0.02% / Taker 0.05%, with a further discount available when paying with BNB. For more details, see the related notes in the Glossary category.
Funding rates vary wildly by coin
We also ran a comparison of funding rate levels across several different trading pairs at the same point in time:
| Pair | Current rate | 30-day average | 30-day high | 30-day low |
|---|---|---|---|---|
| BTCUSDT | +0.0100% | +0.0089% | +0.0345% | -0.0042% |
| ETHUSDT | +0.0100% | +0.0091% | +0.0287% | -0.0091% |
| SOLUSDT | +0.0125% | +0.0156% | +0.0521% | -0.0142% |
| DOGEUSDT | +0.0231% | +0.0287% | +0.1120% | -0.0850% |
| 1000PEPEUSDT | +0.0850% | +0.0921% | +0.7500% | -0.5000% |
You can see that mainstream coins have small rate swings, while the more meme-like a coin gets, the more violent its funding rate becomes. This is a useful rule of thumb — when trading futures, stick to mainstream pairs like BTC and ETH where funding rate costs stay predictable.
How the funding rate affects your entry decisions
In practice, we always glance at the current rate before opening a position:
- If the rate is high (> 0.03%) and we want to go long, we hesitate, because the cost is clearly meaningful
- If the rate is negative and we want to go long, it's actually a bonus (you get paid to hold)
- If the rate is high and your holding period will cross a settlement time, factor that cost into your expected P&L
A finer-grained tactic: opening a position a few minutes before settlement lets you immediately "earn" or "lose" one settlement. If you're on the receiving side, open before settlement; if you're on the paying side, wait until after. This trick only really matters to long-term, high-frequency traders — casual users don't need to bother with it.
If you've just opened futures trading and are still getting familiar with the rules, we'd suggest first finding "Demo Trading" on the official Binance App (under the "..." menu in the top-right corner of the futures page, look for "Demo"), and running a few funding rate settlements with virtual funds to get a feel for how the deductions work.
FAQ
Q: Can the funding rate liquidate my position? A: Getting liquidated purely because of a funding rate deduction almost never happens on its own, since a single deduction maxes out at 2% of your position (the rate cap), and margin ratios are usually far above that threshold. But if you're already sitting close to the liquidation line, a funding rate deduction could be the last straw.
Q: Do delivery futures have a funding rate? A: No. Delivery futures (quarterly contracts) lock in price through expiration and delivery, so they don't need a funding rate mechanism. The funding rate is unique to perpetual futures.
Q: Does only Binance charge a funding rate? A: No. Every exchange that offers perpetual futures has a funding rate mechanism, including OKX, Bybit, Bitget, and others. The mechanics are broadly similar, differing mainly in settlement frequency and rate caps/floors.
Q: Is it true you can get paid for holding through a negative rate? A: Yes. We tested a negative-rate BTC period and, on a 1,000 USDT position, received 0.05-0.15 USDT per settlement. But negative rates usually don't last long, and they tend to correspond to extremely bearish sentiment — going long during that window means the price-drop risk can easily outweigh the funding gain.
Q: How do I avoid funding rate deductions? A: The only reliable way is to close your position before the settlement time. If you plan to reopen right after settlement, you'll pay the open/close trading fees twice (roughly 0.04%-0.10% combined), which is usually more than a single funding deduction (0.01%).
Q: Where can I see funding rate deductions? A: In your futures account's "Funding Records" or "Transaction History," filter by type "Funding Fee" to see a breakdown of every settlement charge. For where exactly to find this page, see our note on how to read the tabs on the Binance orders page.
Q: Is every contract settled every 8 hours? A: No. Binance's mainstream pairs settle every 8 hours, but some high-volatility listings settle every 4 hours, and a small number every 1 hour. Each contract's detail page lists the exact cycle under "Contract Rules."
Q: Does the funding rate affect long-term coin holding? A: No, as long as you buy spot BTC/ETH rather than futures. The funding rate is only charged on futures positions. If you're a long-term holder, just buy on the Binance spot market — for deposit steps, see the Deposit Lab category.
Q: Can the funding rate spike suddenly? A: Yes. In extreme conditions (say, a coin surging 50% in a single day), the rate can jump from 0.01% to 0.5% or even hit the 2% cap. If you happen to be on the paying side, a single settlement could cost 0.5%-2% of your position. So during sharp moves, keep a close eye on rate changes.