What Are Bybit Funding Fees?

Perpetual contract trading is similar to futures contracts, whereby traders can leverage up and don’t exchange the underlying assets on the spot. The main difference between the two is that a perpetual contract has no expiration date, which means that traders can hold the contract (technically forever). Without a fixed delivery date, the contract price and spot price may never converge.

In order to anchor the perpetual contract trading price to the spot price, the funding mechanism is to ensure Bybit’s last traded price is always anchored to global standard spot prices. Here’s a brief overview of how it works: Should the trading price sit above the spot price, long position holders will pay the funding fees to short position holders. This incentivizes traders to open more short positions and brings down trading prices, shifting toward the spot price.

Let's say the trading price is lower than the spot price. In this case, short position holders will pay the funding fees to long position holders, so that the latter is placed in the driver’s seat to open more positions. Thus, prices are driven up, achieving a similar objective to narrowing the spread.

How Does the Funding Mechanism Work?

On Bybit's trading platform, the funding fee for USDT Perpetual Contracts and Inverse Perpetual Contracts will be settled immediately based on the rate derived from the current funding interval. The funding rate calculated between 12AM UTC (midnight) and 8AM UTC will be used to derive your funding fees at 8AM UTC.

Bybit's funding fee will be incurred every 8 hours. However, every trading symbol will have its funding time interval. Bybit may adjust the funding time interval based on the live market situation when there is a significant price gap between the Last Traded Price and Mark Price.

Do take note that the exchange does not collect the funding fees. Instead, they are exchanged between the long and short positions. If the funding rate is positive, long position holders will pay trading fees to short position holders. Alternatively, if the funding rate is negative, short position holders will end up paying trading fees to long position holders.