Understanding Hyperliquid Funding Rates: A Trader's Guide

Jan 26, 2026

Why funding rates matter in crypto perpetuals

Perpetual futures (“perps”) are a cornerstone of crypto trading because they allow leverage and short exposure without an expiry date. The trade-off is funding: a recurring payment exchanged between longs and shorts to keep the perp price anchored to a reference price. If you ignore funding, you can be “right” on direction and still bleed PnL over time.

This guide explains how funding works on Hyperliquid (HL), how to interpret it, and how to manage risk—especially in a market where funding can flip quickly during volatility. (hyperliquid.gitbook.io)

Funding rates 101 (in plain trading terms)

What funding is (and what it isn’t)

Funding is a peer-to-peer payment between traders holding positions (longs ↔ shorts). It is not a trading fee charged by the venue. (hyperliquid.gitbook.io)
Funding exists to reduce persistent divergence between:
- the perp’s traded price, and
- a spot or index reference price (the “fair” anchor).

A helpful mental model:

If a perp trades above its reference, the market is paying a premium to stay long → longs typically pay shorts.
If a perp trades below its reference, shorts are the crowded side → shorts typically pay longs.

For a general explanation of why perps use funding to track spot, see Coinbase’s overview of funding mechanics. (Coinbase: Funding rate mechanism) (help.coinbase.com)

How funding works on HL (the practical details traders care about)

1) Funding is paid every hour

On HL, funding is settled hourly (your balance is credited/debited at the funding interval). (hyperliquid.gitbook.io)

Why this matters:

Hourly settlement makes funding more “granular” than platforms that settle every 8 hours.
It also means short holding periods can still incur meaningful funding if rates spike.

2) The rate is computed like major perp venues (but with specific parameters)

HL’s documentation describes a structure that mirrors common perp designs:

Interest component: predetermined at 0.01% per 8 hours (equivalently 0.00125% per hour), described as reflecting relative borrow costs (USD vs spot crypto). (hyperliquid.gitbook.io)
Premium component: derived from how far the perp is from an oracle-based reference price (more on the oracle below). (hyperliquid.gitbook.io)

HL computes an 8-hour funding rate, but pays it hourly at one-eighth of the computed 8-hour value. (hyperliquid.gitbook.io)

Reference: HL Docs: Funding

3) Funding uses an oracle price (and the premium uses impact prices)

A key implementation detail: funding notional conversion uses the spot oracle price (not the mark price). In other words, the payment at the interval is:

funding_payment = position_size * oracle_price * funding_rate (hyperliquid.gitbook.io)

The premium calculation uses “impact” bid/ask prices (estimated execution prices for a defined notional) relative to the oracle price. This design aims to reduce manipulation from thin order books and align funding with executable market conditions. (hyperliquid.gitbook.io)

4) Funding is capped

HL states funding is capped at 4% per hour (cap and interval do not depend on the asset). (hyperliquid.gitbook.io)

That cap is an extreme boundary, but it signals an important point: in tail events, hourly funding can become a material PnL driver.

Oracle vs mark price: don’t mix up the two

To trade perps safely, you need to distinguish:

Oracle price: used to compute funding; updated by validators frequently. (HL Docs: Robust price indices) (hyperliquid.gitbook.io)
Mark price: used for margining, liquidations, TP/SL triggers, and unrealized PnL calculations; designed to be robust against sudden order book moves. (HL Docs: Robust price indices) (hyperliquid.gitbook.io)

Why this matters for funding:

You can’t accurately estimate funding cost by staring only at last traded price.
During volatility, mark/oracle updates and spreads can shift quickly—funding can change faster than many traders expect.

How to read funding like a pro

Positive vs negative funding

Positive funding: longs pay shorts (being long has carry cost).
Negative funding: shorts pay longs (being short has carry cost).

Convert hourly funding into a “rough daily cost”

A quick approximation:

daily_funding ≈ hourly_funding * 24
APR ≈ hourly_funding * 24 * 365

Example (approximate):

If hourly funding = 0.01% (0.0001), then daily ≈ 0.24%, APR ≈ 87.6%.

This is why high funding is often a sign of crowded positioning—and why funding can dominate PnL for longer holds.

Compute your expected payment

Use HL’s documented payment relationship:

funding_payment ≈ position_size * oracle_price * funding_rate (hyperliquid.gitbook.io)

Example:

Position: long 2 ETH
Oracle price: $2,500
Hourly funding: +0.01% (0.0001)

Estimated hourly funding paid:

2 * 2500 * 0.0001 = $0.50

Trading tactics: using funding instead of being used by it

1) Avoid paying funding unintentionally (position timing)

Because settlement is hourly, “just holding for a bit” can still be expensive if the next hourly rate is elevated. Before opening a position, check:

current funding
projected/next funding (if available in your interface)
whether the market is in a squeeze (funding often spikes)

2) Funding-aware leverage

Higher leverage doesn’t change the funding rate, but it changes how painful funding feels relative to your posted margin.

If you’re running high leverage in a strong trend, you may face:

adverse price move risk, plus
sustained positive funding costs if you’re long into a long-crowded market.

3) Basis / carry trades (advanced, risk-managed)

When funding is persistently high, some traders attempt a market-neutral structure:

short the perp (earn funding), and
hold spot (or equivalent delta exposure) to neutralize direction.

This is not risk-free. You still have:

liquidation/margin risk on the perp leg,
basis risk (spot vs perp can gap),
operational and execution risk.

4) Don’t confuse “high funding” with “free money”

High funding is often present when positioning is one-sided and liquidation risk is elevated. If the trend reverses sharply, the funding you expected to earn can be dwarfed by adverse price movement.

Risk management: funding is secondary—solvency mechanics are primary

Funding affects your balance, but liquidations end trades.

Margin modes: cross vs isolated

HL supports:

Cross margin (shared collateral across cross positions), and
Isolated margin (collateral constrained to a specific position). (HL Docs: Margining) (hyperliquid.gitbook.io)

Practical guidance:

Use isolated when you want to cap downside per idea.
Use cross only when you understand correlated liquidation risk across positions.

Liquidations use mark price

HL liquidation triggers reference the mark price and maintenance margin rules. (HL Docs: Liquidations)

This matters during fast markets: mark price can diverge from last trade and can update based on broader market data—helpful for robustness, but it can surprise traders who only watch the order book.

Auto-deleveraging (ADL) exists for tail events

HL documents ADL as a final safeguard to prevent bad debt if an account goes negative; opposing positions can be closed based on ranking logic. (HL Docs: Auto-deleveraging)

“Latest” context: what recent events taught traders to watch

Even if you’re focused on funding, market structure events change trader behavior—and funding often reacts.

Token and ecosystem expansion: HL launched the HYPE token with a large community airdrop on November 29, 2024, drawing significant attention to onchain perps liquidity and incentives. (CoinDesk coverage) (coindesk.com)
Stress tests in March 2025: A highly leveraged ETH trade unwind contributed to losses in the HLP vault and prompted risk-parameter discussions across the community. (CoinDesk report) (coindesk.com)
Market integrity actions: HL delisted a perp market after suspicious activity and validator action in March 2025, highlighting that exotic/low-liquidity markets can behave differently than majors. (CoinDesk report) (coindesk.com)

Takeaway: during incentive seasons, new listings, or volatility shocks, funding can become both more volatile and more informative—but also more dangerous to chase blindly.

Monitoring funding: UI habits + API basics

What to check before you enter

Current hourly funding rate
Recent funding history (is it stable, trending, or spiking?)
Mark/oracle behavior during volatility (spreads, gaps)
Your margin mode and liquidation buffer

Pull funding history programmatically (for power users)

If you automate analytics, HL exposes public endpoints for data retrieval. The general reference for request types is the developer documentation. (HL Docs: Info endpoint)

For example, third-party infrastructure documentation describes an info request type for funding history (useful for backtests and carry filters). (Chainstack: fundingHistory reference)

Security notes (especially during airdrop seasons)

Funding strategy doesn’t help if you lose funds to phishing.

Practical habits:

Use only official links and be cautious with search ads and fake domains.
Treat “support DMs” as hostile by default.
If you’re chasing incentives, read official guidance on avoiding scams. (HL official Medium post on official links & scams) (hyperliquid-exchange.medium.com)

Where a hardware wallet fits (and when it doesn’t)

A hardware wallet like OneKey can reduce key-compromise risk by keeping private keys offline and requiring on-device confirmation for sensitive approvals/transactions—useful when interacting with new dApps, signing onchain actions, or managing long-term holdings alongside active trading.

It won’t prevent losses from leverage, funding, or liquidation—but it can help ensure those losses only come from trading decisions, not from stolen keys.

Summary checklist

Funding is hourly and peer-to-peer on HL. (Funding docs)
Understand the difference between oracle (funding) and mark (liquidations).
Treat extreme funding as a crowding / risk signal, not a guarantee.
Choose margin mode intentionally; liquidations matter more than funding.
In incentive-heavy periods, verify links and harden wallet security.

If you want, share your typical holding time (minutes/hours/days) and whether you trade majors or long-tail perps—I can suggest funding-aware position templates and risk rules that match your style.