What is Funding rate?

The funding rate is the periodic payment that keeps a perpetual future close to the spot price of its asset. Because a perpetual never expires, nothing forces its price to converge with spot on a settlement day, so venues use funding instead: at fixed intervals, usually every hour or every eight hours, traders on the crowded side pay traders on the other side a small percentage of their position. When the contract trades above spot, longs pay shorts; when it trades below, shorts pay longs. Rates are published in advance by every venue.

The rate is small per interval and large over time. A rate that looks like a fraction of a percent, paid every eight hours on a leveraged position, compounds into a meaningful cost over weeks. A long held through a persistently positive funding market can lose more to funding than it makes on price, which is why funding is a line item in real PnL and not a footnote. Venues differ on the interval and the cap.

Funding is also information. A high positive rate says the market is leaning long and paying for the privilege; a negative rate says the opposite. Traders use it as a crowding signal, and some strategies exist only to collect it, holding spot against a short perpetual to earn the funding while staying price-neutral.

For tracking, funding paid and received belongs in the same ledger as fills and fees, because it is money that left or entered the account. TrueHold reads funding on Hyperliquid and Lighter from the public address and on exchanges through the read-only key, and counts it in the PnL of the position rather than leaving it in a separate tab. Over a month of open positions the funding line is often the difference between a trade that looked profitable on the position card and one that actually was.