Executive Summary
Published 10/10/2026, 12:20:00 AM
Hyperliquid's perp funding rate is a peer-to-peer, hourly-settled payment between longs and shorts that keeps the perpetual contract price anchored to the underlying spot (oracle) price. It is computed as the average premium index plus a clamped interest-rate adjustment, capped at 4%/hour, with no fees collected on the payments [Source: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding]. Because perpetuals never expire, funding is the mechanism that forces the contract price back toward spot.
The Formula
The official formula is:
Funding Rate (F) = Average Premium Index (P) + clamp(interest rate − Premium Index (P), −0.0005, +0.0005) [Source: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding]
Key components:
- Interest rate component — fixed at 0.01% every 8 hours, i.e. 0.00125% per hour, or 11.6% APR paid to short. This represents the cost difference between borrowing USD and holding spot crypto, kept consistent with centralized exchanges [Source: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding].
- Premium Index (P) — fluctuates with the gap between the perp contract price and the underlying spot oracle price; sampled every 5 seconds and averaged over the hour [Source: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding].
- Clamp — the
(interest − premium)term is clamped to ±0.0005 (±0.05%) so the interest adjustment cannot swing wildly [Source: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding].
The premium itself is computed as:
premium = impact_price_difference / oracle_price
where impact_price_difference = max(impact_bid_px − oracle_px, 0) − max(oracle_px − impact_ask_px, 0), and impact_bid_px/impact_ask_px are the average execution prices to trade a given impact_notional_usd on each side. The oracle price is computed by each validator as the weighted median of CEX spot prices, weighted by each exchange's liquidity [Source: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding].
Who Pays Whom
- If the perp trades above the oracle price, the premium (and funding rate) is positive → longs pay shorts.
- If the perp trades below spot, the rate is negative → shorts pay longs.
Funding is purely peer-to-peer: no fees are collected on the payments [Source: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding].
Settlement Mechanics
| Parameter | Value |
|---|---|
| Payment frequency | Every hour, at one-eighth of the 8-hour computed rate per hour |
| Payment formula | position_size × oracle_price × funding_rate |
| Price used for notional conversion | Spot oracle price (not mark price) |
| Funding cap | 4%/hour — deliberately less aggressive than CEX counterparts |
| Cap / interval dependence on asset | None — the cap and interval do not depend on the asset |
[Source: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding]
Numerical Example (from the official docs)
With a fixed interest rate of 0.01% and a perp trading at a $10,100 impact bid vs $10,000 spot:
- Premium = ($10,100 − $10,000) / $10,000 = 0.01 (1%)
- Clamped difference = clamp(0.01% − 1%, −0.05%, 0.05%) = −0.05%
- Funding Rate = 1% + (−0.05%) = 0.95%
[Source: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding]
HIP-3 Perps (a Variation)
For HIP-3 perps, a more responsive premium formula is used so deployers can express a wider range of funding behaviors via a funding-rate multiplier and interest rate:
premium = (0.5 × (impact_bid_px + impact_ask_px) / oracle_px) − 1
[Source: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding]
Why It Matters
When funding is high, it incentivizes traders to take the opposite position, which helps pull the contract price back toward spot — the same economic logic as CEX perp funding. Hyperliquid's distinguishing features are the hourly cadence, the 4%/hour cap, and the fee-free peer-to-peer structure. The formula and mechanics are corroborated by independent technical write-ups, including a Medium breakdown that states Funding Rate = Average Premium Index + clamp(Interest − Premium, −0.0005, +0.0005) [Source: https://medium.com/@joaotx/inside-the-perpetual-the-mechanics-of-funding-rates-3896384695c7] and a technical guide from HyperX [Source: https://hyperx.trade/hyperliquid/blog/hyperliquid-funding-rate-mechanics].
Conclusion
Hyperliquid's funding mechanism is an hourly, fee-free, peer-to-peer transfer between longs and shorts, computed from the premium between perp and oracle price plus a clamped interest term, capped at 4%/hour. The precise parameter values (0.01% interest, 4%/hour cap, 5-second sampling) rest primarily on the official documentation, with third-party sources corroborating the formula and hourly settlement.