Funding on crypto futures: how does it affect your positions?

Do you know why the price on futures often differs from the spot price? It's all because of funding — a mechanism that forces traders to pay each other to keep prices in balance.

How does it work?

Imagine: if there are too many long positions, the futures price jumps above the spot price. And to bring it down, a positive funding rate is introduced — the long position pays the short position. Three times a day (every 8 hours) a settlement occurs.

Important: calculated from the full amount of your position with leverage. For example, $100 with 100x leverage = it's like $10,000, and the funding is based on this amount.

What does this mean for the market?

Positive funding = the market is overheated, too many longs → high probability of correction Negative funding = everything in shorts → high probability of a rebound

In a zero-sum game, not everyone can win at the same time. When funding is too high, market makers often lower the price to 'wash' the longs.

Funding is another tool for analyzing market sentiment, but use it as a supplement to your strategy rather than as a standalone entry signal.