Funding APR reveals crowded trades
Annualising funding turns a tiny number into a clear signal: double-digit APR means one side is over-leveraged and paying dearly. Fade the crowd carefully. See the raw cost on the funding fee calculator.
Perpetual swaps stay near spot because of funding β here's the mechanism
A perpetual futures contract has no expiry. Without an expiry, the price would drift from spot. Funding solves this: when perp trades above spot (positive premium), longs pay shorts β creating selling pressure to close the gap. When perp trades below spot, shorts pay longs β creating buying pressure. The rate is proportional to the premium.
Funding payment = rate Γ notional. On Bybit the rate snapshots at 00:00, 08:00, 16:00 UTC. You pay or receive only if you hold a position at those exact moments. Open after 00:00 and close before 08:00 β you skip the 08:00 payment. This is why experienced traders sometimes time exits and entries around funding windows.
Quarterly futures are the alternative: they have a fixed expiry date, no funding, but they trade at a premium or discount to spot (basis). That basis converges to zero at expiry. For multi-week holds comparing cost of perp funding vs quarterly basis is worth doing β the perp vs quarterly calculator does this.
Related: funding cost calculator, perp vs quarterly, funding break-even.