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On bitfinex, funding fee for USD is around 0.05% (daily) while that for other crypto like BTC is 5-10x smaller (around 0.008%).

In my margin account, i have positions in few crypto currencies and i have posted some USD and BTC collateral in margin account. Rest gets 'funded' with USD at 0.05% funding rate daily (thats almost 25% annual cost!).

Is it possible to fund this with BTC instead of fiat and will it reduce my daily funding cost by 5-10x. If so, what do i need to do?

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What you fund your account with is irrelevant to this question.

If you take a long position against a USD pair, you'll borrow USD and pay USD interest. If you short a Coin you will borrow that coin and pay its interest.

Eg. Open long position on BTC/USD for $1000, you'll be borrowing $1000 for your position and would have to pay back $1000 + Interest.

If you short BTC/USD for 1 BTC, you'll be borrowing 1 BTC for your position and would have to pay back 1 BTC + Interest.

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