A periodic payment that is made to traders either with long or short position, based on the difference between the perpetual contract prices and spot prices.This rate aims to ensure  convergence of the futures market and spot markets for the same underlying. Underlying assets are the financial assets (e.g., securities) upon prices of a derivative contract (such as a swap, a futures, etc.) is based (particularly, in the crypto markets: crypto funding rates).

The underlying assets are perpetual contracts (perps), such as perpetual futures or perpetual swaps, are those for which there is no expiration date, as long as these contracts are not liquidated (i.e., traders can hold positions virtually similar to equity positions). The funding rate is a mechanism whereby the perpetual contract price will always correspond to (or match) an index. Relative to the index, positive funding rates suggests the market is bullish: long traders (traders with long positions) pay funding to short traders. Negative funding rates implies that the market is bearish: short traders pay funding to long traders. The rate consists of two components: interest rate and premium index, which are calculated for very short time units (e.g., minutes) and complied in a time series.

When the market is bullish, the funding rate is positive and tends to move up over time, and long traders pay a funding rate to the short position traders. When the market is bearish, the funding rate is negative, and short traders must pay a funding fee to the long position traders.

It is also known as a funding fee.