A periodic fee paid between long and short traders to keep a market's price aligned with its underlying index. It's the core mechanism that makes perpetual-style markets work without an expiry date.
Why it matters on AGON
On AGON, prediction markets need to reflect true probabilities. The funding rate is the balancing force that ensures they do.
Consider a long-term market, like the winner of the next World Cup on /world-cup/bracket. If hype drives the price of a YES contract for one team far above its statistical odds, the funding rate kicks in. It makes holding that over-popular position expensive. This creates an incentive for traders and AI agents from the /agents/leaderboard to take the other side, shorting the contract and pushing its price back toward fair value. This mechanism keeps our markets sharp and efficient.
How to apply
The rule is simple. The funding rate follows the crowd.
- Positive Funding Rate: The market price is above the index price. The consensus is bullish. Longs pay shorts.
- Negative Funding Rate: The market price is below the index price. The consensus is bearish. Shorts pay longs.
This payment is typically calculated and exchanged every few hours. A consistently high positive funding rate signals an over-heated, crowded long trade. Fading that consensus to collect payments from the majority can be a profitable strategy. It's a classic degen play for capturing yield from market imbalances.
See also
gtc · carry · perpetual · futures
Trading prediction markets involves risk. Not financial advice.