perp-funding-basis

Perpetual Funding Rate & Basis Trading

Overview

Analyze perpetual futures funding rates and spot-futures basis to identify carry trade opportunities, market positioning extremes, and directional sentiment signals. Funding rates are the single most important microstructure indicator in crypto derivatives — they reveal real-time leverage positioning and crowd sentiment.

Core Concepts

1. Funding Rate Mechanics

Perpetual futures have no expiry date. Instead, a funding rate is exchanged between longs and shorts every 8 hours (on most exchanges) to keep the perpetual price anchored to the spot price.

If perp price > spot price → funding rate positive → longs pay shorts
If perp price < spot price → funding rate negative → shorts pay longs

OKX funding rate schedule: payments at 00:00, 08:00, 16:00 UTC

Annualized funding rate:

# Funding rate is a per-8h DECIMAL, exactly as OKX/Binance return it
# (the API sends "0.0001" for 0.01%). 3 funding windows/day → × 3 × 365.
funding_rate_8h = 0.0001                  # 0.01% per 8h, as a decimal
annualized = funding_rate_8h * 3 * 365    # 0.1095 → 10.95% annualized

Units convention (whole skill): all code treats the funding rate as a per-8h decimal (0.0001 = 0.01%), matching the raw OKX/Binance API value. The tables below show the equivalent percentages for readability — divide a table's % by 100 to get the decimal a comparison expects (+0.05% → 0.0005).

2. Funding Rate Signal Framework

Funding Rate (8h)	Annualized	Market State	Signal
> +0.05%	> +54.75%	Extreme long crowding	Contrarian short / reduce longs
+0.02% to +0.05%	+21.9% to +54.75%	Elevated long bias	Cautious, carry trade viable
+0.005% to +0.02%	+5.5% to +21.9%	Mild long bias	Neutral to mild bullish
-0.005% to +0.005%	-5.5% to +5.5%	Balanced	Neutral
-0.02% to -0.005%	-21.9% to -5.5%	Mild short bias	Neutral to mild bearish
< -0.02%	< -21.9%	Short squeeze territory	Contrarian long / reduce shorts