# Funding Rate Risk The native yield of sUSDh is generated by a positive funding rate incurred by the short position backing the Bitcoin-native bond. While on average the funding rate is positive (yield generating), it is possible that at times, typically during bear markets, the funding rate can go negative. This means that the position held by Hermetica incurs a cost. This deteriorates the collateral of the USDh hedged position and causes a loss in value. #### **Mitigation** We mitigate this risk by having the [Hermetica Reserve Fund](/usdh/hermetica-reserve-fund.md) that kicks in every time negative funding has to be paid. Using historical funding data as well as forward looking analysis, we have determined a safe initial size of the insurance fund that makes the risk of depletion due to negative funding unlikely. In addition, the Hermetica Reserve Fund grows over time, as a fraction of the positive funding is fed into the Reserve Fund. We adjust this fraction according to market conditions. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.hermetica.fi/usdh/risk-disclosures/funding-rate-risk.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.