What Are Funding Rates?

Imagine stepping into a crowded elevator that starts moving in the wrong direction. Someone has to press the correct button to get it back on track. In crypto trading, funding serves a similar purpose by helping steer the market back toward the spot price.The funding rate refers to the periodic payments exchanged between traders holding long and short positions in perpetual futures. This mechanism is necessary to ensure that the futures price does not deviate too far from the spot price of the u