How a funding rate bot works: rotation, modes, results

A funding rate bot buys a coin on the spot market and shorts the same amount on its perpetual future (perp). The two price moves cancel out, and the short collects the funding payment every hour. The bot moves capital to the coins whose funding is expected to pay most. In Prow's tests on past prices, on 19 Hyperliquid coins, these rules earned about 9.3% a year in Fast reaction mode and about 9.0% in Steady mode from July 2024 to March 2026. The likely range was wide. Funding can turn negative, and then the bot pays.

This guide explains each decision of Prow's Funding bot.

What does a funding rate bot do?

• Spot is the coin itself. A perp is a futures contract on it with no expiry date.
• A long gains when the price rises. A short gains when it falls.
• Funding is a payment between perp traders. When the perp trades above the spot price, longs pay shorts. Hyperliquid settles it every hour. See the funding rates guide.

The bot holds a hedged pair: a spot long and a perp short of the same size in the same coin.

Prow's Funding bot holds up to three pairs at a time on one Hyperliquid account. The trade is called cash and carry, and the cash and carry guide shows it by hand.

How does the bot choose coins?

It predicts each coin's funding as an average of the hourly funding already paid over the last day (Fast reaction) or week (Steady). Recent hours count more.

A single high hour is not a signal: funding often spikes and falls back within hours. An average moves slowly, so the bot enters only where high funding has lasted. Current rates per coin are on Live funding rates, like HYPE.

When does it enter, hold and switch?

Opening and closing a pair (a round trip) costs fees. The rules avoid trades that funding can't pay back.

Enter. The expected funding must be above an entry level: 25% a year in Fast reaction, 20% in Steady. For scale, Hyperliquid's baseline rate of 0.00125% per hour is about 11% a year. The expected funding over two weeks must also pay for the round trip.

Worked example. One pair: $1,000 of spot and a $1,000 short. Funding stays at 25% a year, the Fast reaction entry level, for 14 days.

The fees are Hyperliquid's base rates for an order that fills at once (a taker order), checked on October 5, 2026. See Perp DEX fees compared and Fees.

Three things lower it:

• Slippage, the gap between the price you see and the price you get.
• Prow's fee: 0% until Dec 31, 2026, then 0.025% per trade. On Hyperliquid spot it applies to sells only. So from Jan 1, 2027 three of the four trades carry it: $0.75 here, leaving $6.54.
• Margin. The short needs USDC (a dollar stablecoin) set aside as well, so the return on all the money used is lower.

Hold. The bot keeps a pair for at least 24 hours (Fast reaction) or 3 days (Steady). Otherwise it would keep paying fees on rates that wobble.

Leave. After the minimum hold, it closes a pair once the expected funding falls below 0.

Switch. With three coins held, it swaps the weakest for a better one only when the extra funding over two weeks beats three times the cost of switching.

Fast reaction or Steady: what is the difference?

From the two modes in the bot's docs:

Margin is the USDC that backs a short. Leverage means the short puts up only part of its value as margin: at 2x, half. The spot side is always paid in full.

How does the bot open positions and protect the shorts?

The bot sends both orders at the same moment, priced to fill at once. If one side fills and the other doesn't within 5 seconds, the bot completes or unwinds it.

When prices rise, the shorts lose USDC and need more margin. A margin guard checks this every second:

• If the margin the shorts need grows past 1.6 times the bot's USDC, it makes every position smaller.
• If the bot's USDC falls to 1.5 times the shorts' maintenance margin, it closes them all. Below that minimum, Hyperliquid force-closes the position. This is liquidation.
• Each short also keeps a stop order on Hyperliquid, a little before its estimated liquidation price. It works even if Prow's service is down.

What did the research find?

Prow tested these rules on past data: 19 Hyperliquid coins that have a spot pair, with hourly funding from February 2024 to October 2026. The test charged Hyperliquid's fees, Prow's fee and slippage. Details: what the research found.

• Walk-forward means the settings were re-chosen each quarter on past data only. Its low end, about 4% a year, is about what idle USDC or short-term government bills earn.
• The shipped settings are the ones the bot runs now. They were picked on data up to March 2026, so the middle row is the period they were chosen on. April to October 2026 came after, but it is one six-month window: read it as a check.
• Returns are on the whole capital. Only about 30–60% of it is in positions at a time.
• Returns fell over time. In the walk-forward, the first quarter of 2026 earned about 4% (Steady) and 2% (Fast reaction), close to cash.
• Few coins carried it. Most of the funding came from PURR and HYPE, then FARTCOIN and XMR. BTC and ETH rarely clear the entry level.

The tests use today's coin list and leverage limits and assume Prow's service is always up. See Past results.

What do you need to run Prow's Funding bot?

• A Hyperliquid account on unified balance, where spot and perps share one USDC balance. See Unified account.
• At least 300 USDC, and at most 300,000 per bot. Larger capital earned less in the research, about 8.8–9.5% a year at $300k, because each position is capped at 5% of its coin's daily volume.
• A key that can trade and cannot withdraw. The Prow Bots key places orders but can't withdraw or transfer funds. See the agent wallet guide.

In the app it is under Bots > Create > Funding.

What are the risks?

More: Is delta neutral risk-free?.

How does a funding bot differ from arbitrage and a spot hedge?

The arbitrage test covered 25 coins, 2025 and 2026. See How crypto arbitrage bots work.

Docs: Arbitrage bot.

Docs: Spot hedge.

Frequently asked questions

How much does a funding rate bot earn?

It depends on the period and the coins. In Prow's test on past prices, July 2024 to March 2026, the Funding bot's rules earned about 9.3% a year (Fast reaction) and about 9.0% (Steady) on the whole capital, after fees and slippage. The likely range was wide, and in the first quarter of 2026 the return was close to what cash earns. These are simulated past results.

What happens to a funding bot when funding turns negative?

The short pays funding instead of receiving it. Prow's Funding bot closes a pair once its expected funding falls below 0 and the minimum hold has passed. That takes about a day in Fast reaction and possibly several days in Steady.

Does a funding bot work on BTC and ETH?

Rarely, with Prow's rules. The bot enters a coin only when its expected funding is above 20% or 25% a year. In Prow's research, BTC and ETH seldom reached that level.

Can a funding bot withdraw my money?

Prow's Funding bot can't. It trades with the Prow Bots key, which can place and cancel orders but can't withdraw or transfer funds.

Is a funding bot the same as an arbitrage bot?

Not quite. A funding bot holds a spot long against a perp short on one exchange and earns that perp's funding. A funding arbitrage bot holds a perp long on one exchange and a perp short on another, and earns the difference between their rates.

Sources

Checked October 7, 2026:

• Hyperliquid docs: Funding, Fees, Margining
• Prow docs: Funding bot, Fees
• Prow data: Live funding rates, Perp DEX fees compared
• Prow research: figures as published in the Funding bot docs on October 6, 2026