Futures Encyclopedia 01: What is a Funding Rate?

1. Only Perpetual Contracts (with no delivery date) have a funding rate.

KuCoin Futures supports both perpetual contracts and quarterly delivery contracts.

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BTC Perpetual/USDT

The ticker symbol of the contract indicates that the contract is perpetual (with no delivery date) and is settled by USDT, which means traders need to deposit USDT to trade the BTC contract, and the system uses USDT for profits calculation.

 

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BTC Quarterly 0326

The ticker symbol indicates that the contract has a delivery date and is delivered quarterly. For the example given, the delivery date of the contract is by March 26 (0326).

 

2. How to check the funding rate of a Perpetual Contract

You can check the funding rate of any selected Perpetual Contract in the trading interface.

On the website, you can find it at the top of the page (see Figure 1).

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Figure 1

On the App, you need to go to “Futures” on the bottom bar and tap the K-line icon (see Figure 2). From there you can check the funding rate (see Figure 3).

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Figure 2

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Figure 3

3. What is the Funding Rate

The funding rate represents the difference between the price of the perpetual contract market and that of the Spot market. The larger the absolute value of the funding rate, the larger the difference between the two prices.

Funding can be calculated through the funding rate.
Calculation formula: Funding = Position value * Funding rate

The funding will be settled at 20:00, 04:00, 12:00 each day (UTC).

When the funding rate is positive, holders of long positions pay for those of short positions.

Most investors are optimistic about the market, so the price of the Futures market is way higher than that of the Spot market. To avoid the extremely large difference between the prices, when settling fundings, the system will charge traders who long and pay those who short.

Investors can close their long positions before the time of settlement to avoid paying the funding.

 

When the funding rate is negative, then vice versa.

Funding is charged peer to peer between traders. Therefore KuCoin Futures will NOT charge any fees

4. How to check funding history

You can also check the funding details.

On the website, you can find it under “Funding History” as shown below:

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On the App, you can check the history via Assets >>> Futures >>> Choose the coin/token >>> Transaction History.

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If you did not close your position, then the funding settlement will not affect your current balance. Only when you close your position will the funding be incorporated into your balance.

 

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