In cryptocurrency trading, funding refers to the "funding rate" that is periodically exchanged between traders who hold positions in perpetual futures contracts.
Funding is a small payment, either credited or debited, for traders with open positions in these perpetual futures. This mechanism helps balance the difference between the price of the underlying asset (like Bitcoin) and the derivative contract over time.
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Perpetual futures are unique because they don’t have an expiration date, allowing traders to hold positions indefinitely. To keep the contract price aligned with the actual asset's price, the funding rate system was created. It ensures the market remains stable by encouraging balance between long and short positions.
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