Definition ∞ Overnight funding refers to the practice of borrowing and lending assets for a single day, typically to cover short-term liquidity needs or to capitalize on very brief market opportunities. In traditional finance, this often involves interbank loans or repurchase agreements. In digital asset markets, it can pertain to short-term collateralized loans or funding rates for perpetual futures contracts. These short-duration financial arrangements are critical for maintaining market stability and liquidity.
Context ∞ In crypto news, overnight funding is most frequently discussed in relation to derivatives markets, specifically the funding rates of perpetual swaps. High or low funding rates can indicate extreme bullish or bearish sentiment among traders, influencing short-term market movements. Debates sometimes involve the volatility of these rates and their impact on leveraged positions. Monitoring overnight funding rates provides valuable insight into the speculative activity and overall health of the derivatives landscape.
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