Funding rate explained: the small hourly payment between longs and shorts

A perp has no end date. So what stops its price drifting far away from the real coin price? Funding. It is a small payment that flows between the traders betting up and the traders betting down, every hour, nudging the perp back toward the real price. You will see it as a line in your trade history. This guide explains where it comes from and how much it really costs.

What is the funding rate?

The funding rate is a small percentage of your position that longs pay shorts, or shorts pay longs, at regular times while a perp is open. It is the price of keeping a perp in line with the coin it tracks.

Imagine everyone suddenly wants to bet Bitcoin goes up. They push the perp's price above Bitcoin's real price on big exchanges. Funding turns positive: longs now pay shorts. Being long costs a bit, being short earns a bit. Some traders open shorts to collect that, which pushes the perp price back down. The opposite happens when everyone bets down.

It is not a fee to the exchange. On Hyperliquid, funding is paid directly between traders and the exchange takes nothing from it (>Hyperliquid docs, funding).

Who pays funding, longs or shorts?

When funding is positive, longs pay shorts. When it is negative, shorts pay longs. The sign tells you which side the crowd is leaning toward.

So funding can also be income. A short during a hyped rally gets paid every hour it stays open, as long as the price does not run it over.

How often is funding paid on Hyperliquid?

Every hour. Hyperliquid computes an 8-hour rate and pays one eighth of it each hour, so payments are small and frequent.

Many big exchanges charge funding every 8 hours. Hyperliquid splits it into 24 small payments a day instead. The rate itself is capped at 4% per hour, the same for every coin (>Hyperliquid docs, funding). That cap is a safety limit for extreme moments. Normal funding is a tiny fraction of it.

How is the funding rate calculated?

It has two parts: a fixed interest part and a premium part that measures how far the perp trades from the real price. The premium usually decides the sign.

In Hyperliquid's own words, the rate is the average premium plus a clamped interest difference (>Hyperliquid docs, funding). In plain words:

• Interest part. Fixed at 0.01% every 8 hours, so 0.00125% per hour. On its own it means longs pay shorts a little. Hyperliquid says it reflects the difference in cost between borrowing dollars and borrowing crypto.
• Premium part. Sampled every 5 seconds and averaged over the hour. If the perp trades above the oracle price (a fair price built from big spot exchanges), the premium is positive. If below, negative.

The payment for your trade is your position size, times the oracle price, times the rate. Note the detail: Hyperliquid uses the oracle price, not the mark price, to turn your position into dollars.

How much does funding cost a small trade?

Usually cents. At the baseline rate, a $200 position pays about a quarter of a cent per hour, around 6 cents a day.

Let's do the math with the baseline 0.00125% per hour, when the premium is near zero:

Now the hot case. In a crowded rally, funding can run ten or twenty times the baseline for a while. At ten times, the $200 position pays about 60 cents a day. Held a week, that is over $4, a big bite out of a $20 trade.

Two lessons: funding follows the position size, so the multiplier grows it too. And funding matters most for trades held a long time on crowded coins.

Can funding be negative?

Yes. Negative funding means shorts pay longs. It happens when the crowd leans down and the perp trades below the real price.

After a sharp crash, many traders pile into shorts. The perp can trade below the real price, and funding flips negative. Longs then get paid every hour to hold. Some traders look for this: a long on a coin with negative funding earns a small income while waiting for a bounce. It is still a bet on price. Funding income does not save a trade that keeps falling.

Does funding tell me where the price is going?

No, it tells you where the crowd is leaning. Very high funding means many traders are long and paying for it. That can keep going for a while, or snap.

Traders watch funding as a mood meter. When funding is very high, a lot of people are betting up with leverage. If the price dips, many of them get liquidated at once, which pushes the price down further. That is called a long squeeze. The reverse, on crowded shorts, is a short squeeze. Funding hints at the risk of a squeeze. It does not time it.

How does funding work when I copy a whale?

Your copy pays or receives funding exactly like the whale's position, at your size. It shows up in your trade result, already counted.

If you copy a whale who holds a long for three days on a coin with high funding, your copy pays that funding for three days too, in proportion to your position. With practice money on CopyHype, trading fees count the same way as in real money; with real money, funding shows in your history too, so long holds cost a little more than practice shows. On the whale's page, check how long they held their last trades, in Last results. A trader who holds for days on hyped coins pays more funding than one who is in and out within hours.

How can I keep funding costs low?

Hold for shorter periods on crowded coins, keep the multiplier modest, and check the rate before long holds. Funding is rarely a reason to skip a good trade, but it is a reason to avoid sleeping on a bad one.

• Look at the rate on the coin. Hyperliquid shows the current funding and a countdown on every market.
• Lower multiplier, lower funding. Funding scales with the position, not your amount.
• Long holds on hyped coins add up. A week at high funding can cost more than the trading fees.
• Being on the receiving side is a bonus, not a plan.

Frequently asked questions

Is funding a fee?

Not to the exchange. On Hyperliquid, funding is paid between traders and the exchange keeps none of it. It is a cost or an income depending on your side.

Do I pay funding if I close before the hour?

Funding is paid on positions that are open at each hourly payment. A trade opened and closed between two payments pays no funding.

Why do longs usually pay funding?

Because of the fixed interest part, and because crowds tend to lean bullish. When the premium is near zero, the interest part alone means longs pay shorts a little.

Can funding liquidate me?

Funding is taken from the position's margin, so very high funding over a long time can slowly bring a trade closer to liquidation. For small, short trades it is rarely the cause.

Does CopyHype charge anything on funding?

No. CopyHype's fee is 0.1% of the position when a trade opens and when it closes. Funding goes straight between traders on Hyperliquid.

Where do these facts come from?

From Hyperliquid's official funding documentation. Sources:

• >Hyperliquid docs: funding
• >Hyperliquid docs: contract specifications

Cost examples use the baseline interest rate and ignore the premium. Real funding changes every hour. Funding, oracle price and squeeze are defined in the perps glossary.