Hyperliquid funding rates: the formula and the real cost

Why funding exists

A perpetual future has no expiry, so nothing forces its price to converge with the underlying asset. Funding is the mechanism that does that job. When the perpetual trades above the index, longs pay shorts, which makes being long more expensive and pulls the price back. When it trades below, the flow reverses.

It is not a fee. The exchange takes none of it. It is a transfer between the two sides of the market.

The formula

The documented rate is:

Funding Rate (F) = average premium index (P)
                 + clamp(interest rate - P, -0.0005, 0.0005)

The components:

Component	Value
Interest rate	0.01% per eight hours, paid to shorts
Interest rate, hourly equivalent	0.00125%
Clamp on the interest term	plus or minus 0.0005
Payment interval	every 1 hour
Cap	4% per hour
Price used for notional	oracle price

The premium is derived from the impact price difference against the oracle price, so it reflects where the book would actually fill size rather than the last trade.

Two structural details separate this from most venues. Payments are hourly, not every eight hours, so the cost accrues in smaller and more frequent increments. And the notional is computed from the oracle price, which makes the charge resistant to someone pushing the mark price around.

What it actually costs to hold

Read the funding column as a running cost. A rate that looks negligible per hour compounds: the same rate charged twenty-four times a day, every day, is the number that decides whether a multi-day position is viable.

Our funding cost calculator turns a rate and a holding period into a figure in dollars.

Reading funding as a signal

Funding tells you how the market is positioned, which is information.

Strongly positive means longs are crowded and paying to stay. Crowded longs are the fuel for a long squeeze, because a fall liquidates them into the same direction.

Strongly negative means the reverse.

Near zero means the two sides are roughly balanced and the perpetual is tracking the index closely.

None of this predicts direction. It tells you where the pain would be, which is a different and more useful thing.

Funding arbitrage, honestly

The strategy is straightforward to describe: hold the receiving side of a high funding rate and hedge the price exposure elsewhere, collecting the funding as the payoff.

It is much harder to run than to describe. The rate you are farming moves and can flip while you hold it. The hedge has its own funding, fees and slippage. Both legs need margin, and a liquidation on either turns a market-neutral position into a directional one at the worst moment. And the return is quoted as an annualised rate on a position that rarely survives a year.

Worth understanding. Not a beginner’s strategy, and not passive income.

Where funding is not what you expect

Builder-deployed markets compute the premium slightly differently, using the midpoint of the impact bid and ask against the oracle rather than the standard impact price difference.

Non-crypto markets track underlyings with trading hours. Funding continues while the underlying market is shut, so the cost of holding through a weekend is not the same as holding through a weekday.