What Is the Funding Rate in Bitget Futures Trading?

[Estimated reading time: 5 minutes]

This article explains funding rates in Bitget futures trading and how they are calculated. Note that funding fees are not paid to Bitget but are settled directly between long and short position holders.

When the funding rate is positive, long positions pay the funding fee to short positions. Conversely, when the funding rate is negative, short positions pay the funding fee to long positions. Bitget does not charge any service fees, as its role is simply to facilitate these payments between traders. In cryptocurrency futures trading, funding rates help maintain market stability by balancing long and short positions.

 

What are funding rates?

Funding rates help ensure that the perpetual futures price closely tracks the underlying asset's spot price. This mechanism facilitates periodic funding fee payments between long and short position holders, bringing the futures price closer to the spot index price.

• If the funding rate is positive, longs pay shorts.

• If the funding rate is negative, shorts pay longs.

Bitget does not charge these fees. It simply facilitates funding fee settlements between traders.

Funding fees are typically settled every eight hours at 8:00 AM, 4:00 PM, and 12:00 AM (UTC+8). For certain futures, the settlement interval may be every two or four hours. Traders will only pay or receive funding fees if they hold a position at the settlement time. Funding rates are continuously calculated to ensure smooth trading, although funding fee processing may occasionally experience slight delays during periods of heavy trading activity.

 

Funding rate calculation

The funding rate is generally calculated as follows:

Funding rate (F) = clamp([average premium index (P) + clamp(interest rate (I) − average premium index (P), –0.05%, 0.05%)] ÷ (8 ÷ N), min funding rate, max funding rate).

Note: The function clamp(x, min, max) constrains the value of x to the specified minimum and maximum values.

For example: clamp(0.1%, −0.75%, 0.75%) = 0.1%, while clamp(1%, −0.75%, 0.75%) = 0.75%.

 

Where:

• I = 0.01% (interest rate index)

• P = Average premium index, which reflects the spread between the futures price and the spot index price

• N = funding fee settlement interval (hours)

 

Interest rate (I)

The interest rate is typically 0.01%. This value follows industry conventions for cryptocurrency lending rates and represents the baseline funding cost of holding a position. It is defined by Bitget and does not fluctuate with market conditions.

 

Premium index (P)

The premium index reflects the difference between the perpetual futures price and the index price.

Premium index (P) = [Max (0, impact bid price − index price) − Max (0, index price − impact ask price)] ÷ index price

Impact bid price is the average execution price required to fill the impact margin notional on the bid side.

Impact ask price is the average execution price required to fill the impact margin notional on the ask side.

The impact margin notional is the value of a futures position that can be opened using a fixed margin amount at the maximum leverage. It is used to measure the actual market impact of order book depth.

Formula: Impact margin notional = 200 USDT × maximum leverage

Example: For BTCUSDT, the maximum leverage is 150x, so the impact margin notional = 200 × 150 = 30,000 USDT.

 

Impact price calculation steps

1. Accumulate order value across price levels: For the bid (or ask) side of the order book, cumulatively sum the order value (price × quantity) at each price level, starting from the best available price.

2. Identify the threshold level (n): Find the level n at which the cumulative order value first exceeds the impact margin notional, i.e.:

3. Calculate the impact price:

 

Impact price calculation example (simplified)

Assume the BTCUSDT impact margin notional is 30,000 USDT, with the following bid order book:

 

Tier	Price (p)	Quantity (vol)	Order value	Cumulative order value
1	70,000	0.2	14,000	14,000
2	69,900	0.15	10,485	24,485
3	69,800	0.2	13,960	38,445

 

The cumulative order value at tier 3 (38,445 USDT) is the first to exceed 30,000 USDT, so n = 3.

Impact bid price = 30,000 ÷ [(30,000 − 24,485) ÷ 69,800 + 0.35] ≈ 69,887 USDT

 

Minimum and maximum funding rates

• Maximum funding rate = 0.75 × maintenance margin rate (default value, adjustable within the range of 0.01–2)

• Minimum funding rate = -0.75 × maintenance margin rate

These limits help keep funding rates within a reasonable range while accounting for leverage levels and market conditions.

 

Weighted average calculation

Bitget calculates the premium index (P) every five seconds. For an 8-hour settlement cycle (with 5760 premium index samples), the weighted average is calculated as follows:

Average premium index (P) = (premium index_1 × 1 + premium index_2 × 2 + ... + premium index_5760 × 5760) ÷ (1 + 2 + ... + 5760)

To improve continuity and smoothness, premium index samples from the previous settlement cycle are also included when calculating the average premium index for the current settlement cycle. For example, if the settlement cycle is eight hours and settlement occurs at 8:00 AM, the sampling window used to calculate the average at 12:00 PM spans 4:00 AM–12:00 PM, rather than just 8:00 AM–12:00 PM.

Data points closer to the settlement time carry greater weight. This reflects the principle that market conditions immediately before settlement have a greater influence on the final settlement result. Giving more weight to recent data provides a more accurate reflection of current long and short market dynamics while reducing the impact of anomalous data collected earlier in the settlement cycle.

 

Funding fee calculation

Once the funding rate is determined:

Funding fee = position value × funding rate = futures position size × mark price × funding rate

Example:

• Long position: 10 BTC

• Mark price: 70,000 USDT

• Funding rate: 0.01%

Position value = 70,000 × 10 = 700,000 USDT

Funding fee = 700,000 × 0.01% = 70 USDT

Because the funding rate is positive, the long position holder pays 70 USDT to the short position holder. If the position is closed before the funding fee settlement time, no funding fee will be charged.

Note: If the paying party is liquidated, or has insufficient margin (in isolated margin mode), the receiving party may not receive the full funding fee amount.

 

Conclusion

Funding rates fluctuate with market conditions and trading activity. Traders should monitor market conditions closely and adjust their strategies accordingly.

The funding rate mechanism is essential for keeping perpetual futures prices aligned with spot market prices and contributes to a fair and efficient trading environment. Understanding funding rates and how they are calculated is essential for effective risk management and informed decision-making in cryptocurrency derivatives trading.

 

FAQs

1. What is the funding rate in Bitget futures trading?

The funding rate is a mechanism that facilitates periodic funding fee payments between long and short position holders. It helps keep perpetual futures prices aligned with the spot index price. Bitget does not charge funding fees—they are settled directly between traders.

2. When are funding fees charged or received?

Funding fees are typically settled every eight hours at 8:00 AM, 4:00 PM, and 12:00 AM (UTC+8). Traders who hold positions at any of these settlement times will either pay or receive funding fees.

3. Who pays the funding fee—long or short position holders?

• When the funding rate is positive (bullish), longs pay shorts.

• When the funding rate is negative (bearish), shorts pay longs.

4. What happens if the paying party's position is liquidated or they have insufficient margin?

If the paying party is liquidated, or has insufficient margin in isolated margin mode, the receiving party may not receive the full funding fee amount. Traders should monitor their positions and available margin to ensure funding fees can be settled properly.

5. Why does the funding rate exist?

The funding rate exists to help keep perpetual futures prices aligned with spot market prices, balance long and short positions, and promote a fair and stable trading environment.

 

Disclaimer and Risk Warning

All trading tutorials provided by Bitget are for educational purposes only and should not be considered financial advice. The strategies and examples shared are for reference and may not reflect actual market conditions. Cryptocurrency trading involves significant risk, including the potential loss of capital. Past performance is not indicative of future results. Always conduct your own thorough research and understand the risks involved. Bitget is not responsible for any trading decisions you make.