Can funding rates be negative?

Yes, funding rates can be negative. Funding rates are periodic payments between traders in perpetual futures contracts, designed to keep contract prices aligned with spot market prices. When the market is bearish and more traders hold short positions, funding rates typically turn negative. This means short position holders pay long position holders. Conversely, positive funding rates occur during bullish periods when longs pay shorts. Negative rates incentivize traders to open long positions, helping rebalance the market. Traders should monitor funding rates before entering positions, as negative rates can reduce profits for short sellers and represent free income for long holders.