I just saw some of you asking what negative funding is, so I wrote this article to explain clearly. This Funding Rate is actually not about the exchange cheating or scamming; it’s just an automatic mechanism to balance the market.

Basically, when there is a discrepancy between the spot price and the futures price, meaning the spot and contract prices differ, the funding rate is generated to adjust for that. Usually, the funding rate ranges from -0.05 to 0.05, which is normal. But sometimes it gets really intense, dropping to -2% in a session because one side’s price is overwhelmingly dominant.

Now, let’s talk specifically about negative funding. When the funding is negative, long position holders will receive money from short sellers. Conversely, short sellers have to pay fees to longs. The amount you pay or receive depends on your margin and leverage used. Each session lasts 4 or 8 hours depending on the platform, and the funding fee is calculated automatically.

If the funding is positive, the opposite happens: short sellers receive money, and long holders pay. The important point is that changes in funding reflect market trends. When too many people are long, the funding becomes positive to slow down the buying. When too many are short, the funding turns negative to balance things out.

The exchange is just a playground for everyone to trade; it doesn’t profit from funding. Funding is money transferred between traders, and the exchange is not involved. Understanding this mechanism well will help you manage risks better when trading futures. Do you have any other questions? I’m ready to answer.