Funding Rates on dYdX
Funding rates are the mechanism that keeps dYdX perpetual prices aligned to the underlying spot price. Unlike GMX's utilization-based borrow fee (a cost extracted by the protocol), dYdX's funding is a direct payment between longs and shorts - the protocol takes zero cut. When the market is long-heavy, longs pay shorts; when short-heavy, shorts pay longs. This market-based mechanism is how Binance, Bybit, and other CEX perpetuals work, and it's how dYdX incentivizes price convergence without an oracle setting the price.
Funding Rate Visualizer
Drag the long/open-interest slider to see how the funding rate changes. Watch how positive funding (longs pay shorts) drives arbitrage activity that pushes the perp price back to spot.
Perp-Spot Arbitrage Mechanics
Funding rate arbitrageurs are the people who keep perp prices in line with spot. Here's how the math works when funding is positive (longs paying shorts):
The Funding Rate Formula
Fixed 0.01%/hr on dYdX, mirroring the industry standard set by Binance. This accounts for the time value of holding a position and ensures perpetual contracts always have a slight cost basis that discourages infinite arbitrage at exactly 1:1 with spot.
Dynamic, driven by long/short OI imbalance. When longs are 70% of OI, premium = 0.2%/hr multiplier. When balanced (50/50), premium ? 0. The premium is what actually drives the realignment pressure.
Funding is continuous, calculated per second and exchanged per hour. PnL from funding appears in your unrealized PnL alongside price PnL - it's not a separate settlement event. The net effect on your position is immediate.
Historical Funding Rate Timeline
Funding rates are a barometer of market conviction. During the 2024-2025 bull market, BTC-PERP often sustained 0.05-0.15%/hr funding as longs crowded in. Use the slider to explore what a sustained funding rate means for position costs over time.
Funding Rate Benchmarks Across Markets
Funding rates vary by asset and market conditions. Larger, more liquid markets (BTC, ETH) have lower baseline funding; smaller altcoin markets can have very high funding during periods of directional conviction.
| Market | 8h Funding | Annualized | Typical Direction | Notes |
|---|---|---|---|---|
| BTC-PERP | ~0.01% | ~3.6% | Usually near zero | Deepest book, lowest funding |
| ETH-PERP | ~0.02% | ~7.3% | Bias toward positive | Strong ETH bull conviction, higher longs |
| SOL-PERP | ~0.05-0.15% | ~18-55% | Volatile, trend-driven | Higher beta to BTC trends |
| LINK-PERP | ~0.05-0.10% | ~18-36% | Alt season, DeFi narrative | Smaller market, more OI imbalance |
| High-beta Alt-PERP | 0.15-0.50%+ | 54-180% | Meme coins, narrative plays | Can be extremely costly to hold long |
* Figures are illustrative of typical ranges, not live data. Actual funding rates vary continuously. At 0.5%/hr, holding a long costs ~12% per day - often exceeding potential price gains.
Why Funding Beats Borrow Fees (GMX Comparison)
- Direct long->short payments; protocol takes 0%
- Rate determined by genuine market imbalance
- Market makers arbitrage to keep perp aligned
- Funding can be negative - you earn by holding a position
- Accrues continuously at per-second granularity
- Fee goes to GLP pool; protocol extracts via trading fees
- Rate = utilization base rate (fixed formula)
- No arbitrage mechanism; oracle sets price
- Always a cost - never earn from holding a position
- Accrues hourly (less granular)