How is the funding rate calculated?

The funding rate formula may be different depending on exchange. 

Coinbase Derivatives Exchange

The funding rate is calculated hourly based on the difference between futures and spot prices:

  1. Premium Calculation: The difference between futures mark price and spot mark price is measured every 3 minutes over an hour (20 data points total)
  2. Scaling: The average is scaled down by a factor of 24 to represent the hourly premium
  3. Smoothing: A smoothing factor is applied:
    • Current hour's premium: 75% weight
    • Previous hour's funding rate: 25% weight

Formula: (Premium × 0.75) + (Previous Funding Rate × 0.25)

Where:

  • Premium = TWAP([(Futures mark - Spot mark) / Spot mark / 24], 1 hour, 3min)
  • Futures mark = 3m VWAP of futures (with fallbacks to TWAP of midpoint or previous mark + adjustment)
  • Spot mark = 3m VWAP of spot (with fallbacks to TWAP of midpoint or previous mark + adjustment)

Please Note

  • If the futures market is closed for an entire hour, no funding rate is published for that hour.
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