Negative funding rate: what it means and what it doesn't

A negative funding rate means the perpetual has been trading below its spot index, so positions on the short side pay positions on the long side. It tells you who is paying to hold their side right now, not where the price goes next.

The one-sentence definition of funding is on the funding rate page. This guide looks at the sign of the rate: why zero is not the neutral point, what turns a rate negative, how extreme it can get and how to read it without reading too much into it.

Who pays whom

Funding is a payment between traders. When the perpetual's price is above the spot oracle price, the premium and the funding rate are positive and longs pay shorts. When the perpetual trades below the spot price, the rate is negative and shorts pay longs. No fee is taken from the payment.¹

On Hyperliquid the payment is made every hour and is the position size times the oracle price times the rate. A negative rate is therefore a cost for every short position and an income for every long position, in proportion to the size of the position, settled hour by hour for as long as the rate stays negative.¹

Why zero is not the neutral point

The funding formula has two parts: an average premium and a fixed interest part, combined through a clamp. The interest part is 0.01% every 8 hours, which is 0.00125% every hour, or about 11.6% a year paid to shorts. As long as the average premium stays within a band around it, the clamp returns exactly this interest rate.¹

That makes a small positive number, not zero, the normal state of a perpetual in calm conditions. Working through the formula (rate = premium + clamp of interest minus premium at ±0.05%), the rate only drops below zero once the average premium is lower than −0.05% on the 8-hour basis. Between −0.05% and −0.04%, the rate is still positive but below the baseline.¹

Two practical consequences follow:

• Below the baseline is already information. A rate that is positive but lower than the usual baseline means the perpetual traded cheaper than in calm hours, even though longs still pay.
• A negative rate needs a real discount. The perpetual has to trade below spot, at the impact size used for the premium, for most of the hour.

How hourly and 8-hour rates compare, and how traders try to collect funding with spreads between venues, is explained in the guide on funding rates and funding arbitrage.

What pushes funding below zero

The premium is measured with impact prices: the average price at which a trade of a fixed size would fill against the bids and against the asks. If even the ask side of the book, at that size, sits below the oracle price, the premium is negative.¹ In words: at that moment, more traders want short exposure through the perpetual than long exposure, and they accept a price below spot to get it.

There are several reasons a trader holds a short, and the rate counts all of them the same way:

• A directional view. Someone expects the price to fall.
• A hedge. A holder of the spot asset shorts the perpetual to remove price exposure while keeping the asset.
• One leg of a spread. A short on one venue against a long elsewhere, held for the difference in rates.

Funding does not tell these apart. It only measures the net result of all of them at the impact size, averaged over the hour.

Extreme funding: how far it can go

Venues cap funding. On Hyperliquid the cap is 0.5% per hour, the same for every asset.¹ On Binance the cap for a published list of contracts is 0.75 times the maintenance margin ratio, and ±2% for other USDⓈ-M perpetuals; the floor is the negative of the cap, and both can be adjusted in extreme conditions.²

Extreme rates usually show up as annualised numbers, and annualising makes them look larger than the payment behind them:

Annualising is useful for one thing: it puts hourly and 8-hourly venues in the same unit. Our pages show both, the rate per hour and the annualised rate (hourly rate × 24 × 365).

What negative funding says, and what it doesn't

What it does say:

• Over the last interval, the perpetual traded below the spot index at the impact size.
• Holders of shorts paid holders of longs for that interval.
• If it persists for many hours, the discount is not a single trade but a lasting imbalance in demand for the two sides.

What it does not say:

• The direction of the next move. Crowded positioning can persist for a long time, and the rate describes the past interval only.
• How many shorts there are. Funding is a price, not a count. A thin market can show an extreme rate with little open interest behind it. The open interest and long/short guide explains how to read the size of the market next to the rate.
• Why traders are short. Hedges, spreads and directional bets all pay the same rate.
• What the next payment will be. The rate is recomputed every hour from the premium of that hour.

Reading negative funding on our pages

The funding page lists every coin per venue, per hour and annualised. The sort "Most extreme" brings the largest rates in either direction to the top, counting only markets with real size; the default sort by open interest shows whether a large rate sits on a large or a small market.

Two other views help to judge whether a negative rate is a moment or a trend:

• Predicted funding shows the rate each venue expects at its next settlement. A big gap between the current and the predicted rate means the rate is still moving. The method is on the predicted funding page.
• Positioning over time. Each coin's positioning tab shows funding next to open interest and the long/short ratio, so you can see whether the rate turned negative while new positions were being opened or while old ones were being closed.

Frequently asked questions

Does a long position earn money when funding is negative?

Yes. While the rate is negative, longs receive the payment from shorts at every funding time, in proportion to their position size. On Hyperliquid that is every hour. It is not interest from the exchange; it comes from the other side of the market.

Why do two venues show different negative rates for the same coin?

Each venue computes its own premium from its own order book and index, and venues pay on different schedules and with different caps. The difference between the highest and the lowest rate of the same coin is the funding spread, shown on the funding page.

Does a negative rate say anything about the next price move?

No. It describes how the market was positioned over the last interval. It can stay negative while the price keeps falling, and it can turn positive without any price move at all.