What is the funding fee?
Funding fees are periodic payments between longs and shorts in perpetual futures, designed to keep the perp price close to spot.
- Positive funding: longs pay shorts.
- Negative funding: shorts pay longs.
The platform just matches these payments between traders; it does not “earn” this fee.
Why does funding exist?
Perpetuals have no expiry, so prices can drift away from spot.
- If perp > spot → funding tends to be positive → being long gets more expensive → encourages selling or going short.
- If perp < spot → funding tends to be negative → being short gets more expensive → encourages buying or going long.
Step by step, this nudges the perp price back toward spot.
How often and how is it charged?
Each platform and each contract set their own funding schedule (for example, every 8 hours or every hour).
While exact formulas differ by platform, the core logic is very similar.
- The system measures the gap between the perpetual price and a reference price (spot or an index).
- If the perp trades at a premium to spot, the funding rate tends to go positive; if it trades at a discount, the rate leans negative.
- That rate is then applied to your position’s notional value over the funding period to determine how much you pay or receive.
You can roughly think of it as: “How far is perp from spot, and how big is my position?”
What’s new on KuCoin?
KuCoin Futures has already adopted a more stable, reliable funding rate algorithm for selected perpetual contracts, and will gradually roll it out to all markets. Find the latest Announcement here.
- The new approach focuses on smoothing out sudden, abnormal spikes caused by quick wicks or thin order books.
- For everyday users, this means more predictable funding, fewer surprise jumps, and funding rates that track genuine buying and selling pressure more closely.
In other words, funding becomes less of a random shock and more of a clear, transparent cost (or yield) that you can actually plan around.