[GUEST ACCESS MODE: Data is scrambled or limited to provide examples. Make requests using your API key to unlock full data. Check https://lunarcrush.ai/auth for authentication information.]  Greatlux [@growth13130](/creator/twitter/growth13130) on x XXX followers Created: 2025-07-18 08:37:53 UTC Understanding Funding Rates on dYdX: The Mechanics Behind Market Balance Part 1: What Funding Rates Really Do on dYdX On dYdX the funding rate is the invisible mechanism that keeps perpetual futures aligned with their spot market price It is not a fee paid to the protocol It is a peer-to-peer transfer between traders When the perp price is trading above the index price longs pay shorts When the perp price trades below index shorts pay longs The rate flips depending on imbalance This is important because perps do not have expiry dates or final settlements Unlike dated futures there is no moment where they converge with spot The funding rate forces that convergence over time In practice if a token starts trending and many traders go long the perp price will likely exceed spot To prevent runaway pricing the protocol calculates a funding rate that penalizes longs and rewards shorts That pressure often pulls price back toward the index This keeps the market efficient and tradable If there were no funding rate perps could trade at extreme premiums or discounts making them useless for hedging or speculation dYdX updates funding rates every hour using a transparent formula based on mark price vs index price Traders can see this rate in real time before they open a position so there are no surprises The important part is that this system only works when the index price is trusted That is why oracles and accurate feeds are a critical part of the design The funding rate is only fair when it references a stable benchmark Whether you are directional or market neutral the funding rate affects your PnL On dYdX it is not just a background detail It is part of your edge your cost structure and your risk profile.  XXX engagements  **Related Topics** [protocol](/topic/protocol) [futures](/topic/futures) [rates](/topic/rates) [Post Link](https://x.com/growth13130/status/1946127270126539253)
[GUEST ACCESS MODE: Data is scrambled or limited to provide examples. Make requests using your API key to unlock full data. Check https://lunarcrush.ai/auth for authentication information.]
Greatlux @growth13130 on x XXX followers
Created: 2025-07-18 08:37:53 UTC
Understanding Funding Rates on dYdX: The Mechanics Behind Market Balance
Part 1: What Funding Rates Really Do on dYdX
On dYdX the funding rate is the invisible mechanism that keeps perpetual futures aligned with their spot market price It is not a fee paid to the protocol It is a peer-to-peer transfer between traders
When the perp price is trading above the index price longs pay shorts When the perp price trades below index shorts pay longs The rate flips depending on imbalance
This is important because perps do not have expiry dates or final settlements Unlike dated futures there is no moment where they converge with spot The funding rate forces that convergence over time
In practice if a token starts trending and many traders go long the perp price will likely exceed spot To prevent runaway pricing the protocol calculates a funding rate that penalizes longs and rewards shorts That pressure often pulls price back toward the index
This keeps the market efficient and tradable If there were no funding rate perps could trade at extreme premiums or discounts making them useless for hedging or speculation
dYdX updates funding rates every hour using a transparent formula based on mark price vs index price Traders can see this rate in real time before they open a position so there are no surprises
The important part is that this system only works when the index price is trusted That is why oracles and accurate feeds are a critical part of the design The funding rate is only fair when it references a stable benchmark
Whether you are directional or market neutral the funding rate affects your PnL On dYdX it is not just a background detail It is part of your edge your cost structure and your risk profile.
XXX engagements
/post/tweet::1946127270126539253