Perpetual Futures and Funding Rates: What Crypto Traders Need to Know

Perpetual futures, or perps, are among the most traded instruments in crypto. They behave like futures without an expiration date. To keep their price close to the underlying spot price, exchanges use a mechanism called the funding rate. If you trade perps, funding is part of your P&L whether you track it or not.

How perpetuals work

• You go long or short with leverage, posting margin.
• There is no expiration, so you can hold indefinitely.
• Profit and loss come from price changes, minus fees, plus or minus funding.

The funding rate

At regular intervals, often every eight hours on many exchanges, traders on one side pay traders on the other side:

• Positive funding: longs pay shorts. Typically when the perp trades above spot, often in bullish markets.
• Negative funding: shorts pay longs. Typically when the perp trades below spot.

The payment is roughly:

Funding payment = Position value × Funding rate

Example: a $50,000 long position with a funding rate of 0.01% per interval pays $5 each interval. Three times a day, that is $15 per day, or about $450 over 30 days. Funding rates change constantly and can be much higher in strong trends.

Why it matters for your results

• Holding costs. A long position in a strongly bullish market can pay significant funding over weeks.
• Hidden in the numbers. Funding is often shown separately from trade P&L on exchanges, so it is easy to overlook.
• Strategy choice. Some traders deliberately collect funding with market-neutral positions; most simply need to know what it costs them.

Liquidation

Perps are leveraged. If your margin falls below the maintenance requirement, the exchange liquidates your position, often with an extra fee. High leverage with a distant stop can mean liquidation comes before your stop. Size from your stop, and check that the liquidation price is well beyond it. See leverage and margin.

Tracking funding

Record funding payments as costs or income attached to your trades, or at least as a separate line in your cash flow. Over a month, compare total funding with your trading P&L. See the impact of fees.

In TradeThink

TradeThink imports trades from major crypto exchanges and supports automatic sync with read-only keys. The cash flow page separates trading results from fees, funding and other account movements. Related: crypto trading journal.