What Is the Funding Rate?
The funding rate mechanism is a system where long and short position holders periodically pay each other fees. Its purpose is to ensure that the price of perpetual contracts better reflects the price of the underlying asset, encouraging convergence between contract and spot prices.
Funding fee payments occur only between long and short position holders; the exchange does not charge any fees. When the funding rate is positive, long position holders pay fees to short position holders. Conversely, when the funding rate is negative, short position holders pay fees to long position holders.
There are various settlement intervals for funding fees. For contracts with an 8-hour funding rate settlement cycle, settlements occur daily at 00:00 (UTC), 08:00 (UTC), and 16:00 (UTC). For contracts with a 4-hour funding rate settlement cycle, settlements occur at 00:00 (UTC), 04:00 (UTC), 08:00 (UTC), 12:00 (UTC), 16:00 (UTC), and 20:00 (UTC). Additionally, the system may require a few seconds of processing time to settle platform funding fees; the actual settlement time may vary.
You can find detailed information about contract market settlement cycles, upper and lower limits, and more on the Contract Info Page.
Funding Rate Calculation
Funding Rate Calculation Formula
Premium Index = [ Max (0, Depth-Weighted Bid Price − Index Price) − Max (0, Index Price − Depth-Weighted Ask Price) ] / Index Price
Funding Rate = Clamp [ ( Average Premium Index + Clamp ( 8-hour Interest Rate − Average Premium Index, −0.05%, 0.05% ) ) / (8 / N), −fmax, fmax ]
The funding rate used at final settlement is the result from the last calculation in the current cycle.
Note:
- Average Premium Index: This is the time-weighted average of all calculated premium indices within the current funding rate cycle. The formula is (1 × P₁ + 2 × P₂ + … + n × Pₙ) / (1 + 2 + … + n), where P₁ is the premium index for the first minute and Pₙ is for the last minute. The closer to settlement, the greater the weight.
- N is the funding rate settlement interval in hours. For example, if the funding rate settles every 8 hours, N = 8; if every 4 hours, N = 4.
- fmax and −fmax are the upper and lower limits of the funding rate. You can check real-time and historical funding rates on the Funding Rate Page.
- The funding rate and premium index are calculated every 60 seconds.
- 8-hour Interest Rate = Base Rate / 3.
- The base rate for Gate crypto contracts is 0.03%; for traditional financial contracts, the base rate is 0.
- Gate reserves the right to adjust the funding rate limits and other parameters in extreme market conditions.
Calculation Example
Suppose the current parameters for the BTC_USDT perpetual contract are as follows:
| Index Price | Depth-Weighted Bid Price | Depth-Weighted Ask Price | Base Rate | Settlement Interval (N) | Funding Rate Limits (fmax) |
|---|---|---|---|---|---|
| 100,000 USDT | 100,200 USDT | 100,100 USDT | 0.01% | 8 hours | ± 0.75% |
Step 1: Calculate the Current Premium Index
Premium Index = [Max(0, 100,200 − 100,000) − Max(0, 100,000 − 100,100)] / 100,000 = [200 − 0] / 100,000 = 0.02%
Step 2: Calculate the Average Premium Index
Suppose 4 premium indices have been calculated during this settlement period: 0.005%, 0.015%, 0.025%, and 0.020%. Using the weighted formula:
Average Premium Index = (1 × 0.005% + 2 × 0.015% + 3 × 0.025% + 4 × 0.020%) / (1 + 2 + 3 + 4) = 0.019%
Step 3: Calculate the Funding Rate
Funding Rate = Clamp [(0.019% + Clamp(0.01% − 0.019%, −0.05%, 0.05%)) / (8 / 8), −0.75%, 0.75%] = Clamp [(0.019% + (−0.009%)) / 1, −0.75%, 0.75%] = 0.010%
Depth-Weighted Price Calculation
Suppose the order book is as follows, with a depth-weighted amount of 20,000 USDT.
| Order Level | Price | Quantity (BTC) | Order Value (USDT) |
|---|---|---|---|
| Ask 3 | 130,000 | 0.4 | 52,000 |
| Ask 2 | 120,000 | 0.25 | 30,000 |
| Ask 1 | 110,000 | 0.1 | 11,000 |
| Bid 1 | 100,000 | 0.05 | 5,000 |
| Bid 2 | 90,000 | 0.1 | 9,000 |
| Bid 3 | 80,000 | 0.2 | 16,000 |
Calculating the Depth-Weighted Bid Price
The order value at Bid 1 is 5,000 USDT, which is less than 20,000 USDT, so the entire quantity (0.05 BTC) is used in the calculation.
Bid 2's order value is 9,000 USDT. The cumulative value for Bid 1 and Bid 2 is 5,000 + 9,000 = 14,000 USDT, still less than 20,000 USDT, so all 0.1 BTC from Bid 2 is also included.
Bid 3's order value is 16,000 USDT. The cumulative value for Bid 1, 2, and 3 is 5,000 + 9,000 + 16,000 = 30,000 USDT, which exceeds 20,000 USDT. The first two levels total 14,000 USDT, so we need an additional 20,000 − 14,000 = 6,000 USDT from Bid 3. The BTC allocated from Bid 3 is 6,000 ÷ 80,000 = 0.075 BTC.
The total BTC used for the depth-weighted bid price is 0.05 + 0.1 + 0.075 = 0.225 BTC.
Depth-Weighted Bid Price = 20,000 ÷ 0.225 ≈ 88,888.89 USDT
Calculating the Depth-Weighted Ask Price
Ask 1's order value is 11,000 USDT, less than 20,000 USDT, so the full quantity (0.1 BTC) is used.
Ask 2's order value is 30,000 USDT. The cumulative for Ask 1 and 2 is 11,000 + 30,000 = 41,000 USDT, exceeding 20,000 USDT. Ask 1 has already used 11,000 USDT, so we need 20,000 − 11,000 = 9,000 USDT from Ask 2. The BTC allocated from Ask 2 is 9,000 ÷ 120,000 = 0.075 BTC.
Total BTC counted: Ask 1: 0.1 BTC, part of Ask 2: 0.075 BTC. Total: 0.1 + 0.075 = 0.175 BTC.
Depth-Weighted Ask Price = 20,000 ÷ 0.175 ≈ 114,285.71 USDT
Funding Fee Calculation
Funding Fee = Position Value × Funding Rate
USDT-Margined Contracts
Position Value = Mark Price × Position Size × Contract Multiplier
Coin-Margined Contracts
Position Value = Position Size × Contract Multiplier / Mark Price
For detailed calculation examples, see the How to Calculate Perpetual Contract Position Value page.
Example
Suppose a user holds a long position in the BTCUSDT perpetual contract, with a position size of 10,000 contracts, a contract multiplier of 0.0001 BTC, the current mark price is 95,000 USDT, and the funding rate for this cycle is 0.02%.
USDT-margined contract position value = Mark Price × Position Size × Contract Multiplier = 95,000 × 10,000 × 0.0001 = 95,000 USDT
Funding Fee = Position Value × Funding Rate = 95,000 × 0.02% = 95,000 × 0.0002 = 19 USDT
Therefore, the user needs to pay a funding fee of 19 USDT for this cycle.
Funding Fee Settlement
At the end of the funding rate settlement cycle, users will pay or receive the corresponding funding fee based on the final funding rate result. Users should monitor changes in margin ratios to prevent liquidation.
In isolated margin mode (including classic contract accounts, unified account single-currency mode, and unified account cross-currency mode), funding fees are deducted from or credited to the margin of the corresponding isolated position.
In cross margin mode (including classic contract accounts, unified account single-currency mode, unified account cross-currency mode, and unified account portfolio margin mode), funding fees are deducted from or credited to the relevant asset balance in cross margin.
Additionally, the system may require a few seconds of processing time to settle platform funding fees; the actual settlement time may vary. For example, if a trader opens a position at 08:00:00 (UTC+8), the funding fee may still be charged or credited, depending on whether the trader is a payer or receiver in that funding cycle.
Adjustment of Funding Rate Parameters
Gate periodically adjusts the upper and lower limits of contract funding rates and settlement intervals to adapt to market changes and reserves the right to modify these parameters at any time.
For traditional financial products, the platform typically maintains a fixed 8-hour settlement cycle. These products are not subject to the automatic adjustment mechanism for funding rate settlement cycles and have lower funding rate limits to ensure low volatility.
Automatic Adjustment Mechanism for Funding Rate Settlement Cycle
If the funding rate in a contract market reaches the upper or lower limit at settlement, the system will automatically adjust the settlement cycle for that market to 1 hour. This adjustment will not be announced in advance. If the funding rate does not reach the limit at settlement but the platform decides to adjust the cycle, a separate announcement will be made.
When market conditions stabilize, the system will automatically determine whether to change the settlement cycle from 1 hour to 4 hours. The following conditions must all be met:
- The funding rate cycle for the contract market is currently 1 hour.
- The absolute value of the funding rate for 16 consecutive settlements is below 0.025%.
Once these conditions are met, the system will automatically adjust the settlement cycle to 4 hours after the 16th settlement. This automatic adjustment will also not be announced in advance.
For other types of adjustments, such as when the automatic adjustment conditions are not met but the platform still decides to change the cycle, an announcement will be made.
Examples
Using the USDT-margined BTCUSDT perpetual contract as an example, with funding rate limits of +0.3%/−0.3% and a default settlement interval of 8 hours:
Scenario 1: Automatic Adjustment to 1 Hour
If at the 2025.07.09 16:00 (UTC+8) settlement, the BTCUSDT perpetual contract's funding rate reaches +0.3% or −0.3%, the settlement interval will automatically switch to 1 hour from the next cycle. The next settlement will be at 2025.07.09 17:00 (UTC+8). This adjustment will not be announced in advance.
Scenario 2: Settlement Interval Remains Unchanged
If at 2025.07.09 15:00 (UTC+8), the estimated funding rate for BTCUSDT is 0.3%, but at the actual 2025.07.09 16:00 (UTC+8) settlement, the final funding rate is 0.25% (not reaching the limit), the settlement interval remains at 8 hours.
Scenario 3: Platform-Initiated Adjustment with Announcement
If at the 2025.07.09 16:00 (UTC+8) settlement, the funding rate is 0.1% (not reaching the limit), but the platform decides to change the interval to 1 hour, an announcement will be made in advance detailing the change and its implementation time.
Scenario 4: Automatic Recovery to 4 Hours
Suppose the BTCUSDT perpetual contract is already on a 1-hour settlement cycle. If the absolute value of the funding rate for 16 consecutive settlements is below 0.025% (e.g., +0.01%, −0.008%, +0.015%, etc., for 16 times), the system will automatically revert the cycle to 4 hours after the 16th settlement, without manual intervention or advance notice.
If, on the 10th settlement, the absolute funding rate is 0.03% ≥ 0.025%, the consecutive counter resets to zero, and counting restarts from the 11th settlement.
Disclaimer
The content provided herein is for reference and educational purposes only and does not constitute any financial, investment, trading, or legal advice, nor does it constitute an offer or solicitation to buy or sell any digital assets. Gate makes no express or implied representations or warranties regarding the accuracy, completeness, or timeliness of the information contained herein. Product features, interfaces, rules, and fee structures may be updated or adjusted at any time. Please refer to the latest announcements and the actual information displayed on the Gate platform for the most accurate details.
Digital asset investments involve significant risk, and prices may fluctuate substantially. You may lose the entire amount of your investment. Please make decisions cautiously based on your own financial situation and risk tolerance after fully understanding the associated risks. If necessary, you are advised to consult an independent professional financial or legal advisor.
For more information about potential risks, please refer to Gate's Risk Disclosure and User Agreement.
