Futures Funding

Definition ∞ Futures Funding represents the periodic payments made between holders of long and short positions in cryptocurrency futures contracts. This mechanism aims to align the futures contract price with the spot market price, preventing significant divergence. It is a crucial component of perpetual futures markets, influencing trading strategies and cost of carry.
Context ∞ Discussions concerning Futures Funding rates often focus on their implications for leverage and trading strategies, particularly during periods of high volatility. Analysts are observing how funding rates influence the profitability of long and short positions and their potential to signal market sentiment. Extreme funding rates can sometimes precede significant price movements, making them a key indicator for traders.