Funding Rates

For Perpetual Futures, instead of rollover rates there are funding rates, usually paid every 8 hours. When the funding rate is positive, longs pay shorts, and when the funding rate is negative, shorts pay longs.

When the future is trading below the target, the funding rate becomes more negative helping create buying pressure. When the future is trading above the target, the funding rate becomes even more positive, making it costly to hold a long position and more profitable to short. Otherwise, the default funding rate set by the exchange prevails. This highlights the two roles of the funding rate: reflecting the difference in interest rates between the currencies involved and ensuring the derivative price stays in line with the spot market.

The way the default interest rate is set in most exchanges heavily favors selling futures. Kucoin even has an entire section to incentivize buying crypto on Spot Markets and selling Perpetual Futures, stating that it’s generally profitable. To better trade Futures, it's important to understand why that happens.