Funding rate arbitrage on Hyperliquid
You hold a perp position that receives funding and hedge its price exposure with an opposite position (spot or another exchange's perp). You earn the funding minus trading fees, but the rate changes every hour and can turn against you.
How Hyperliquid funding works
Hyperliquid perps pay funding every hour. The rate is quoted as an 8-hour rate and one-eighth of it is applied each hour. It has two parts:
- Interest rate: fixed at 0.01% per 8 hours (0.00125% per hour), paid by longs to shorts. That is about 11% a year simple, or the 11.6% APR the docs quote with compounding.
- Premium: how far the order book trades above or below the oracle price, sampled every 5 seconds and averaged over the hour.
The formula is funding = premium + clamp(interest − premium, −0.05%, +0.05%). In practice, when the premium stays close to the interest rate, funding settles at exactly the baseline 0.00125% per hour. Funding is capped at 4% per hour and is paid on position size × oracle price, not the mark price. When funding is positive longs pay shorts; when it is negative shorts pay longs. More background is on Hyperliquid funding rates.
The basic trade
If funding on a market is positive, you short the perp to receive funding and buy the same amount of the asset so that price moves cancel out. The hedge can be:
- spot on Hyperliquid itself (see delta-neutral and basis trades),
- a long perp on another exchange where funding is lower or negative, which turns it into a funding differential trade.
Most centralised exchanges settle funding every 8 hours on major pairs (some every 4 or 1 hour), while Hyperliquid settles hourly. Compare rates on the same time basis before you assume a gap exists.
Worked example with real fees
Hypothetical: you short $10,000 of a perp on Hyperliquid and buy $10,000 of the same asset on Hyperliquid spot. Funding averages 0.002% per hour (roughly 17.5% a year if it stayed there, which it rarely does). You are at the base fee tier with no staking discount.
| Item | Taker orders | Maker (limit) orders |
|---|---|---|
| Perp fees, open + close ($10,000 each way) | 0.045% × 2 = $9.00 | 0.015% × 2 = $3.00 |
| Spot fees, buy + sell | 0.070% × 2 = $14.00 | 0.040% × 2 = $8.00 |
| Total round-trip cost | $23.00 | $11.00 |
| Funding received per day (0.002% × 24 × $10,000) | $4.80 | |
| Days to break even | about 4.8 | about 2.3 |
At the baseline rate alone (0.00125% per hour) the same short earns $3.00 a day, so break-even stretches to roughly 8 days with taker fees. The yield is on $20,000 of total exposure plus the margin you keep spare, so the return on capital is lower than the headline funding rate. Run your own numbers in the funding calculator and the fee calculator.
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Open HyperliquidWhat goes wrong
- Funding flips. High funding attracts shorts and usually compresses within hours or days. If it turns negative you start paying.
- Liquidation of one leg. If the asset rallies hard, your perp short loses margin while the spot gain sits in a different balance (unless you use portfolio margin). Keep leverage low and check your level with the liquidation calculator.
- Auto-deleveraging. In extreme moves a profitable short can be closed by auto-deleveraging, leaving the spot leg unhedged. This happened on cross-margin positions for the first time on 10 October 2025.
- Cross-venue risk. With a hedge on another exchange you carry two counterparties, bridge transfers and different liquidation engines.
- Thin markets. The highest funding often appears on small, volatile tokens where slippage on entry and exit can exceed weeks of funding.
Funding arbitrage is not risk-free income. It is a trade with smaller, different risks than a naked position, and it can lose money.
Frequently asked questions
How often is funding paid on Hyperliquid?
Every hour. The rate is expressed as an 8-hour rate and one-eighth is applied each hour, on position size times the oracle price.
What is the default funding rate on Hyperliquid?
When the premium is small, funding equals the interest component of 0.01% per 8 hours (0.00125% per hour), paid by longs to shorts.
Is there a maximum funding rate?
Yes. Funding is capped at 4% per hour, far above normal levels but possible on extreme, illiquid markets.