// Learn
What is funding-rate capture (delta-neutral funding yield)?
A plain-English explainer of the strategy behind Fygga’s research — what a perpetual funding rate is, how a delta-neutral hedge collects it without taking on price direction, and the honest answer to “is it actually profitable?”
Educational information only — not financial advice, not a forecast, and not a signal. All figures are from a historical backtest. Past performance is not indicative of future results.
What is a perpetual funding rate?
A perpetual future (“perp”) is a crypto derivative with no expiry. To keep its price tethered to the underlying spot price, exchanges use a periodic cash payment between longs and shorts called the funding rate, exchanged every few hours. When the perp trades above spot — the usual state, because leveraged traders lean long — longs pay shorts. When it trades below spot, shorts pay longs. It is not a fee the exchange keeps; it is a transfer between the two sides of the market.
How a delta-neutral hedge collects funding without price exposure
On its own, shorting a perp to earn funding leaves you exposed to price: if the asset rises, your short loses more than the funding you collect. The fix is a delta-neutral hedge: short the perpetual and, at the same time, hold an equal amount of the asset in spot. Now if the price rises, the spot leg gains what the short leg loses, and vice-versa — the price move cancels out (“delta” ≈ zero). What’s left is the funding payment, collected with near-zero directional exposure. That is funding-rate capture, also called delta-neutral funding yield or basis capture.
Why does the edge persist rather than get arbitraged away? It’s structural: persistent, leverage-hungry long demand means someone has to be paid to take the short side. As long as retail and momentum capital want leveraged long exposure, a hedged short collects that payment — though its size varies with sentiment, and it can turn negative when the market flips net-short.
The honest answer: a modest edge, not a moonshot
Most bots that sell “funding farming” quote the gross funding number and stop there. We won’t. The funding edge is real but small per period, so costs decide whether anything survives. Here is what Fygga’s committed backtest actually found (five liquid pairs on real Binance history, 2022–2026, both trading legs charged in full):
| Gross funding accrual (before costs) | +19.3% | ~4%/yr — proves the inefficiency exists in isolation |
| Net return, weekly rebalance (after costs) | +2.8% | Sharpe 0.5 · max drawdown -5.3% |
| Annual cost drag | ~2.1%/yr | two-leg fees + slippage |
| Net return, daily rebalance (after costs) | -19.1% | rebalance too often and costs turn the edge negative |
Read plainly: the gross funding was about 4% a year, which is a genuine, market-neutral edge — but after realistic trading costs the honest net on this window was +2.8% total at a weekly cadence, with a shallow -5.3% drawdown. That is a modest, low-drama edge — not a moonshot — and the daily-rebalance row shows how easily costs erase it. And funding can turn negative: when the market flips net-short, the hedged position pays instead of earns. These are historical backtest figures, not a promise of future returns.
These numbers reproduce the committed backtest on the results page exactly. Nothing here is annualised to flatter it.
Why most bots hide this
A gross funding number always looks better than a cost-aware one, and “~4% a year” sells worse than “passive crypto yield.” The honest version is less exciting on purpose. Fygga’s whole approach is to show the edge and the costs that eat it — including the strategies we tested and rejected — so you can judge it for yourself rather than trust a headline.
Estimate it yourself
The best way to build intuition is to run the numbers. Fygga’s illustrative estimator lets you see what a funding rate implies over different periods; the live funding monitor shows what the rate is doing right now.
Frequently asked questions
- What is funding-rate capture?
- Funding-rate capture is a market-neutral strategy that collects the periodic funding payment on crypto perpetual futures. You short a perpetual and hedge it with an equal long spot position, so price moves cancel out and you are left collecting (or paying) the funding rate. When the market is net-long — which it usually is — longs pay shorts, so a hedged short earns the funding with near-zero directional exposure.
- Is funding-rate capture profitable?
- The funding edge is real but modest, and costs decide whether anything survives. In Fygga's committed backtest (2022–2026, five liquid pairs), gross funding accrual was +19.3% (about 4% a year) before costs — but at a realistic weekly rebalance, net return was +2.8% total with a Sharpe of 0.5 and a -5.3% max drawdown after two-leg trading costs. Rebalanced daily, costs actually turned the same edge negative (-19.1%). It is a low-drama, market-neutral edge, not a moonshot. Backtest only — past performance is not indicative of future results.
- What are the risks of funding-rate capture?
- Funding can turn negative when the market flips net-short, so the position can pay instead of earn. Trading costs on both legs can erase the edge if you rebalance too often. There is also execution and basis risk between the perp and spot legs, exchange and counterparty risk, and the risk that the hedge is imperfect. It removes price direction as a risk, not all risk. This is educational information, not financial advice.
Follow the research
Fygga publishes its funding-capture research in the open — the edge, the costs, and the track record. Join the waitlist to follow along.
This page is educational information only — not financial advice, not a forecast, and not a signal. All figures come from a historical backtest and simulation; no live trading, no signal service, and no capital is managed. Past performance is not indicative of future results.