On crypto exchanges, perpetual futures on BTC, ETH, and altcoins come with a cost traders often underestimate: the funding rate. In calm conditions it’s small. In overheated markets—especially on volatile altcoins—it can become the deciding factor, turning “holding a position” into the real trade.

This article focuses on the operational side: what the crypto funding rate is, who pays whom, how to estimate funding fees for your position size, why funding spikes, and how to filter toxic funding conditions before you enter.

Disclaimer: This is not financial advice. Trading involves risk.

What is the funding rate in crypto?

Perpetual futures don’t expire. To keep perp prices anchored near spot, exchanges use funding: a recurring payment exchanged between longs and shorts. When positioning becomes one-sided, funding makes holding the crowded side more expensive, helping rebalance the market.

You’ll typically see:

• funding rate (crypto)
• funding fee
• funding payment
• funding interval (how often it’s charged)

Who pays whom?

For decision-making, you need two inputs: the sign of the rate and the funding interval.

Most venues follow the common convention:

• Positive funding: longs pay shorts
• Negative funding: shorts pay longs

Before you enter any BTC/ETH/altcoin perp, check the current sign and the next funding timestamp. Funding is only “small” until it stacks.

How funding fees are calculated

Funding is charged on position notional, not on the margin you posted.

A simple estimate per funding event:

• Funding fee ≈ Position notional × Funding rate

Example:

• Notional: $1,000
• Funding rate: 0.01% (0.0001)
• Funding fee per event ≈ $1,000 × 0.0001 = $0.10

That looks harmless. But in crypto:

• notional scales quickly with leverage,
• altcoin regimes can push rates higher,
• frequency can compress the timeline.

Why funding rates spike in crypto

High funding is usually a clean signal: positioning is crowded. Common drivers on crypto exchanges are:

• one-sided leverage building up on perps
• strong trends and late chasing
• thinner liquidity on altcoins
• pump phases and squeeze conditions

Funding becomes a pressure mechanism: it penalizes holding on the crowded side and rewards the opposite exposure.

When funding changes the outcome

Funding becomes decisive when:

• you hold long enough for multiple funding events, and
• the accumulated fees become comparable to your expected profit

This matters most for trades that can stall—especially shorts on overheated altcoins. You can be right on direction and still lose on carry.

Funding interval is the overlooked variable

Traders focus on the rate and ignore the interval. That’s a mistake.

A moderate rate charged every 8 hours is not the same as a similar rate charged every hour. Frequency compresses the timeline and turns “holding cost” into a fast bleed.

Hourly funding and the “point of no return”

Some altcoin perps can enter a regime where funding is charged every hour and the rate becomes extreme. In that setup, accumulated funding can erase profit potential surprisingly fast and turn a position into a recurring transfer.

Full breakdown, including the correct same-coin lock approach:

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Where to check funding rates

Traders usually monitor funding in three places:

• the exchange contract page (rate + next funding time)
• a terminal/app showing funding and interval
• funding aggregators comparing venues and symbols

The key is not where you check. It’s whether you treat funding as a first-class risk input before you commit capital.

How crypto-resources.com helps

Our approach is conservative: protect first, trade second.

Screeners

In screeners, you can pre-filter coins by funding conditions before they enter your workflow:

• avoid high-frequency funding regimes
• prefer sane charging intervals such as 4h or 8h rather than 1h
• reduce the chance that holding becomes the real trade

Bots

Our flagship product is a crypto trading bot, and funding protection is part of its risk logic:

• it avoids entries in coins with toxic funding frequency/rates
• it reduces the chance that a short turns into paying to wait

Funding-aware pre-trade checklist

Before entry, answer these in numbers:

• What is the funding rate right now?
• How often is funding charged?
• Which side pays at the next funding timestamp?
• What is the fee per event for my notional?
• What does that cost over a day if the trade stalls?
• If price moves against me, do I exit by rule, or do I have a lock plan?

Conclusion

The crypto funding rate is the carry cost of crowding on perpetual futures. In normal conditions it’s manageable. In overheated coins—especially volatile altcoins—it can become decisive: you pay for time while waiting for your thesis to play out. The clean approach is traditional risk discipline: filter toxic rate and interval conditions before entry, and rely on systems that treat funding as risk, not trivia.