Crypto trading · Intermediate

Perpetual Futures And Funding Rates

A perpetual never settles, so a payment between longs and shorts does the job that expiry does in an ordinary futures contract.

Last reviewed 15 September 2026 by the MarketPro research desk · Editorial policy

In short

A perpetual future tracks an asset's price with no expiry date, and the funding rate keeps it aligned with spot. Every eight hours on most venues, traders on the crowded side pay the other side. When the contract trades above spot, longs pay shorts; when it trades below, shorts pay longs. The exchange routes the payment rather than collecting it.

What to remember

Funding compounds fast. At 0.05% per eight-hour interval, a position pays about 4.5% a month, roughly 55% a year, before spread and commission.
Funding is charged on notional, not margin. At 10x leverage, 0.05% per interval costs about 45% of your posted margin in a month.
The sign of the rate tells you which side is crowded, which is real information about positioning and a poor timing tool on its own.
Perpetuals suit short-horizon trades. For a view measured in months, spot ownership has no carrying cost at all.

Lesson 11 of 20 in Crypto trading

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A futures contract with no expiry needs something to tether it to spot

A perpetual future is a derivative that tracks an asset's price and never settles. Ordinary futures converge on spot because they expire, and arbitrage forces the two together as the date approaches. Remove the expiry and you remove the anchor, so exchanges added a replacement: the funding rate, a payment exchanged directly between the traders holding long and short positions, typically every eight hours.

The mechanism is simple. If the contract trades above spot, longs pay shorts, which makes being long more expensive and being short more attractive until the gap closes. If it trades below spot, shorts pay longs. The exchange does not take the payment, it routes it. Funding is a cost of holding, not a fee for trading.

What 0.05% every eight hours costs over a month

Funding is quoted per interval, and the per-interval numbers look trivial until they are annualised. Take a 10,000 USD long position at three funding intervals a day.

Funding rate per 8h	Cost per day	Cost over 30 days	Approximate annual rate
0.01% (the common baseline)	3.00 USD	90 USD (0.9%)	about 11%
0.05%	15.00 USD	450 USD (4.5%)	about 55%
0.10%	30.00 USD	900 USD (9.0%)	about 110%

At the 0.05% row, that position needs to gain 4.5% in a month simply to break even on carry, before spread and before commission. If the trade is right on direction but takes six weeks to work, funding can consume most of the move. This is the reason experienced traders check the rate before holding a perpetual overnight, and the reason perpetuals are a poor instrument for a long-horizon view. For that, spot ownership costs nothing to hold at all, which the wallets and CFDs lesson works through.

The rate is not fixed. It floats with the premium of the contract over spot and can turn negative, in which case a long position is paid to exist. During sustained rallies rates above 0.1% per interval have persisted for days, and those are the moments when a leveraged long is paying more than 100% annualised for the privilege.

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Funding as a crowding gauge, and where that reading fails

Because the payment flows from the crowded side to the thin side, the sign and size of the rate describe positioning. Persistently positive funding means longs are paying, which means the contract sits above spot, which means leveraged demand is concentrated on the long side. Persistently negative funding says the reverse.

That makes it a genuine sentiment input, and traders use extremes as a contrarian tell: a market where longs are paying 0.15% every eight hours is a market where a sharp move down forces those positions to close, which is what turns a 3% dip into a 10% liquidation cascade. The information is real.

The reading fails in three specific ways, though. Funding measures derivatives positioning only, and says nothing about spot buyers, who may be absorbing everything the liquidations produce. It can stay extreme far longer than a position can stay solvent, so it is not a timing tool. And it is venue-specific: one exchange's funding reflects that exchange's book, and rates can diverge meaningfully between venues without any of them being wrong.

The bill nobody adds up: funding plus leverage

Funding is charged on the notional position, not on your margin, and that is where the arithmetic surprises people. Post 1,000 USD of margin at 10x and you hold 10,000 USD of notional. At 0.05% per interval, you pay 15 USD a day. As a percentage of the money you actually posted, that is 1.5% per day, or roughly 45% of your margin in a month.

So a trade that is flat on price for four weeks has lost close to half of the capital backing it, and the liquidation price has effectively crept closer the whole time, because funding is deducted from the margin balance. High leverage does not just magnify price moves. It magnifies the carrying cost against the only number that keeps you in the position, which is one of the least understood mechanisms in the crypto derivatives market.

Checks before you hold a perpetual overnight

Read the current rate and the predicted next one. Both are published on the contract page of every major venue. It takes five seconds.
Convert it to a monthly figure. Multiply by three intervals a day and by thirty. A number that looks like nothing per interval will often look like a decision per month.
Compare it to your expected holding period. Intraday trades pay funding rarely or never. Anything measured in weeks should be in spot or in a cheaper wrapper.
Express the cost against margin, not notional. At 10x, notional cost times ten is what it does to your posted capital.
Watch for extremes in the direction you are positioned. Being on the crowded side means paying for it and being the fuel for a cascade.

Perpetuals are efficient instruments for short-horizon directional trades and they carry leverage, liquidation and a floating carrying cost that ordinary spot does not. The sizing discipline in the risk management guide applies on top of all of it, and the leverage calculator shows what the multiple you have chosen actually does to the distance between your entry and the point where the position ends.

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Written and reviewed by the MarketPro research desk

MarketPro is a trading-signal and trading-education app operated by Harajuku Holdings LTD (Cyprus). Our signal desk publishes and tracks every trade idea in-app, and every page here is checked against the app's live behaviour before publishing. Last reviewed 15 September 2026. How we produce signals and content · About MarketPro

FAQ

Perpetual Futures And Funding Rates: questions

What is a funding rate in crypto?

It is a periodic payment exchanged between traders holding long and short perpetual futures positions, usually every eight hours. Its job is to keep the contract price tied to the spot price, since a perpetual has no expiry to force convergence. A positive rate means longs pay shorts, and a negative rate means shorts pay longs. The exchange routes the payment rather than earning it.

How much does funding cost over a month?

Multiply the per-interval rate by three intervals a day and by thirty days. At the common 0.01% baseline that is about 0.9% a month on the notional position. At 0.05% it is about 4.5%, and at 0.10% it is about 9%. Because funding is charged on notional rather than margin, leverage multiplies those figures against the capital you actually posted.

Does a high funding rate mean the price will fall?

It means leveraged positioning is crowded on the long side, which raises the risk that a modest decline forces liquidations and accelerates into a larger one. It is not a timing signal. Funding can stay extreme for days while price continues higher, it says nothing about spot demand absorbing the flow, and rates differ between venues.

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