Definition ∞ Perpetual contract funding refers to the periodic payments exchanged between long and short positions in a perpetual futures contract. This mechanism ensures that the contract price closely tracks the underlying asset’s spot price. When the contract price is higher than the spot price, long positions pay shorts, and vice versa. The rate adjusts based on market demand and supply dynamics.
Context ∞ Perpetual contract funding rates are a key metric in cryptocurrency derivatives markets, often analyzed in crypto news to gauge market sentiment. Positive funding rates indicate a prevalence of long positions and bullish sentiment, while negative rates suggest bearishness. Extreme funding rates can signal potential price corrections or liquidity squeezes.
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