Updated 2026-07-25
Negative funding means the funding rate has flipped below zero, so shorts pay longs. Mechanically it happens when the perpetual trades at a discount to the spot index, which usually reflects heavier short positioning or bearish sentiment concentrated in the derivatives market. If you are long, you are paid to hold; if you are short, holding costs you every settlement.
Traders watch it because a crowded short side is the raw material for a squeeze: shorts have liquidation prices above the market, and forcing them out generates buying. But funding is descriptive. Deeply negative funding can persist for days while price keeps falling, and being paid to hold a losing position is not an edge. The useful read is combining it with where the liquidation levels above price actually sit, which is what a liquidation map shows.