Funding rates are a mechanism for perpetual futures contracts to keep the contract price close to the current price of the asset.

That's a lot of jargon. Let's break it down.

A futures contract is like an option in the stock market. Essentially you create a contract to buy or sell an asset at a fixed price at some point in the future. In the typical futures/options market you choose the date when you create the contract (the expiry date). A perpetual futures contract is when there is no dated chosen. Instead the option can be "exercised" (the contract can be closed) at any moment.

Because the demand of a futures contract can vary from the underlying asset, its price can deviate from it over time. For a traditional asset this price deviation is handled at the time when the contract expires.

For perpetual futures contracts, because they don't truly expire, they instead have short terms, such as four hours, the exchange will close out contracts and immediately open new contracts with the same details. The funding rate is a mechanism to settle the difference in price between the futures value to the real value at the close of each term.

The amount charged/paid is set by the market and varies over time. When the funding rate is positive, people with long positions pay a small fee to people with short positions. When the funding rate is negative, people with short positions pay people with long positions. This causes the price of the futures contracts to balance out with the current price of the asset.

It's important to note that the funding rate correlates to the change in price, and not the price itself. So it doesn't matter if BTC is $10k or $20k, it depends on how much percent difference occurred during the term.

In periods when the market is bearish, the funding rate is generally negative (shorts pay longs). In periods when the market is bullish, the fund rate is generally positive (longs pay shorts). You can think of it as the winners are compensating the losers.