Who Pays Funding, Longs or Shorts?.

When the funding rate is positive, longs pay shorts. When the funding rate is negative, shorts pay longs. The payment flows from the crowded side of the market to the uncrowded side: a positive rate means the perp is trading above its index because long demand is heavier, so longs pay for the imbalance, and a negative rate means the perp is trading below its index because short demand is heavier, so shorts pay.

That is the complete answer, and the sign convention is the same on essentially every venue: Binance, Bybit, Hyperliquid, Variational, all of them. If you remember one sentence, remember that the rate’s sign points at who pays, and the payer is always the crowd.

A few clarifications that the one-liner hides. First, this is a payment between traders, not a fee to the exchange. On Hyperliquid the docs are explicit that funding is peer-to-peer and the platform takes no cut, and the same is true across most serious venues. Second, you only pay or receive if you hold the position at the moment funding settles. Close before the snapshot and you owe nothing, which sounds like a loophole and mostly is not, for reasons I cover in do I pay funding if I close before the snapshot. Third, the payment is calculated on your position’s full notional value, not on your margin, which is the single most expensive misunderstanding in leveraged trading and gets its own page in is funding charged on margin or notional.

The part beginners trip on is the intuition for why the crowd pays. It feels backwards: if everyone is long and the price is going up, why are longs punished? Because the perp is a closed system that must track an external price. Every long has a short on the other side, and if long demand pushes the perp above the real index, the contract is now mispriced relative to the thing it tracks. Funding is the market’s correction mechanism: it pays traders to take the unpopular side until the mispricing closes. The punished party is not “the winners,” it is whoever is holding the contract away from its anchor.

Which is why the sign of funding is information before it is a cost. Heavily positive funding on an asset tells you leveraged longs are stacked up and paying to stay. Deeply negative funding tells you shorts are paying a premium to press, which is frequently the more actionable signal, and the one my screener is built to catch. What the sign means about where price goes next is a bigger question, and the honest version of that answer lives in the two trades hidden in every funding dislocation.