What Is the Funding Rate?
The funding rate mechanism is a system where long and short position holders periodically pay fees to each other. Its purpose is to ensure that the price of perpetual contracts closely reflects the price of the underlying asset, encouraging convergence between contract and spot prices.
Funding rate payments occur only between long and short position holders; the exchange does not collect 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 several settlement cycles 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 settlement cycle, settlements occur at 00:00 (UTC), 04:00 (UTC), 08:00 (UTC), 12:00 (UTC), 16:00 (UTC), and 20:00 (UTC).
You can find information about contract market settlement cycles, upper and lower limits, and more on the Contract Information Page.
Funding Rate Calculation
Funding Rate 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 (Base Rate − Average Premium Index, −0.05%, 0.05%)) / (8 / N), −fmax, fmax ]
The funding rate used for final settlement is the result of the last calculation in the current cycle.
Note:
• Average Premium Index: 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. Therefore, the closer to the settlement time, the higher the weight.
• N is the funding rate settlement cycle, measured 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. Real-time and historical funding rates can be found on the Funding Rate Page.
• The funding rate and premium index are calculated every 60 seconds.
• Gate contract base rate is 0.01%.
• Gate traditional financial contract markets have a preset rate of 0.
• Gate reserves the right to adjust the funding rate limits 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 Cycle (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 index calculations have accumulated in this settlement cycle, with values of 0.005%, 0.015%, 0.025%, and 0.020% for the 1st to 4th calculations, respectively. 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 Amount (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 |
Depth-Weighted Bid Price Calculation
Bid 1’s order amount is 5,000 USDT, less than 20,000 USDT, so the entire quantity (0.05 BTC) is used for the depth-weighted bid price calculation.
Bid 2’s order amount is 9,000 USDT. Bid 1 and Bid 2 combined total 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 amount is 16,000 USDT. Bid 1, Bid 2, and Bid 3 combined total 5,000 + 9,000 + 16,000 = 30,000 USDT, which exceeds 20,000 USDT. Since the first two levels total 14,000 USDT, we need to supplement 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 calculation is: 0.05 + 0.1 + 0.075 = 0.225 BTC
Therefore, Depth-Weighted Bid Price = 20,000 ÷ 0.225 ≈ 88,888.89 USDT
Depth-Weighted Ask Price Calculation
Ask 1’s order amount is 11,000 USDT, less than 20,000 USDT, so the entire quantity (0.1 BTC) is used for the depth-weighted ask price calculation.
Ask 2’s order amount is 30,000 USDT. Ask 1 and Ask 2 combined total 11,000 + 30,000 = 41,000 USDT, which exceeds 20,000 USDT. Ask 1 has already used 11,000 USDT, so we need to take 20,000 − 11,000 = 9,000 USDT from Ask 2.
The BTC used from Ask 2 is 9,000 ÷ 120,000 = 0.075 BTC
Total BTC included: Ask 1 quantity: 0.1 BTC, Ask 2 partial quantity: 0.075 BTC. Combined: 0.1 + 0.075 = 0.175 BTC
Therefore, 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 Quantity × Contract Multiplier
Coin-Margined Contracts
Position Value = Position Quantity × Contract Multiplier / Mark Price
For specific calculation examples, see the How to Calculate Perpetual Contract Position Value Page.
Example
Suppose a user holds a long position on the BTCUSDT perpetual contract, with a position quantity of 10,000 contracts, contract multiplier of 0.0001 BTC, current mark price of 95,000 USDT, and the funding rate for this cycle is 0.02%.
USDT-Margined Contract Position Value = Mark Price × Position Quantity × 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), the funding fee will be 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), the funding fee will be deducted from or credited to the relevant asset equity in the cross margin account.
Additionally, the system may require a few seconds to process platform funding fee settlements. The actual settlement time is subject to the platform. For example, if a trader opens a position at 08:00:00 (UTC+8), the funding fee may still be deducted or credited, depending on whether the trader is the payer or receiver in the current funding fee cycle.
Adjustments to Funding Rate Parameters
Gate periodically adjusts the upper and lower limits and settlement cycles of contract funding rates to adapt to market changes and reserves the right to modify relevant parameters at any time.
For traditional financial products, the platform typically maintains a fixed 8-hour settlement cycle. These products are not affected by the automatic adjustment mechanism for funding rate settlement cycles and have lower funding rate limits to ensure rate fluctuations remain at low levels.
Automatic Adjustment Mechanism for Funding Rate Settlement Cycle
When the funding rate at contract market settlement reaches the upper or lower limit, the system will automatically adjust the settlement cycle for that market to 1 hour. This automatic adjustment will not be announced in advance. If the funding rate does not reach the upper or lower limit at settlement, but the platform decides to adjust the settlement cycle, an announcement will be made.
Once market sentiment stabilizes, the system will automatically determine whether to adjust the settlement cycle from 1 hour to 4 hours. The trigger conditions are as follows and 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 in the contract market is less than 0.025%.
After meeting the above conditions, 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 conditions for automatic adjustment are not met but the platform decides to adjust the settlement cycle, an announcement will be made.
Example
Using the USDT-margined BTCUSDT perpetual contract as an example, the funding rate limits are +0.3%/−0.3%, and the default settlement cycle is 8 hours.
Scenario 1: Automatic adjustment to 1 hour
If, at the settlement time of 2025.07.09 16:00 (UTC+8), the BTCUSDT perpetual contract’s funding rate reaches +0.3% or −0.3%, the BTCUSDT funding rate settlement cycle will automatically adjust to 1 hour starting from the next cycle. The next settlement time will be 2025.07.09 17:00 (UTC+8). This adjustment will not be announced in advance.
Scenario 2: Settlement cycle remains unchanged
If, at 2025.07.09 15:00 (UTC+8), the estimated funding rate for BTCUSDT perpetual contract is 0.3%, but at the actual settlement time of 2025.07.09 16:00 (UTC+8), the final funding rate is 0.25% and does not reach the set upper/lower limit, the settlement cycle remains unchanged at 8 hours.
Scenario 3: Platform actively adjusts and announces
If, at the settlement time of 2025.07.09 16:00 (UTC+8), the BTCUSDT perpetual contract’s funding rate is 0.1%, not reaching the upper/lower limit, but the platform decides to actively adjust the settlement cycle to 1 hour, an announcement will be made in advance specifying the change and implementation time.
Scenario 4: Automatic recovery to 4 hours
Suppose the BTCUSDT perpetual contract is already in a 1-hour settlement cycle. If the absolute value of the funding rate for 16 consecutive settlements is less than 0.025% (e.g., +0.01%, −0.008%, +0.015%, etc., all meeting the condition for 16 consecutive times), the system will automatically adjust the settlement cycle back to 4 hours after the 16th settlement, without manual intervention or advance announcement.
If, at the 10th settlement, the absolute value of the 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.
