Perpetual futures never expire, so exchanges use a funding rate to tether their price to spot. This bitkan guide explains the mechanism before you consider leverage.
Why this topic matters
When perpetuals trade above spot, longs pay shorts; below spot, shorts pay longs. The rate is small most of the time, but in euphoric markets it reaches double-digit annualized levels — a silent position cost many first-time futures traders never notice until it compounds.
How to do it well
Check the current rate and its history before opening a position. Extreme positive funding signals crowded longs; extreme negative signals crowded shorts. Funding is income for the paid side and expense for the paying side — factor it into any holding period.
Practical checklist
- Check funding rate and history before entry
- Treat extreme funding as a crowding signal
- Include funding in any position-holding cost model
- Remember spot has no funding at all
Common mistakes
The dangerous pattern is opening a leveraged long at peak positive funding: the position pays rent precisely when a squeeze is most likely. Funding is a signal as much as a cost, and signals are loudest at the worst moments.
What it looks like in practice
Concrete case: a perpetual holds at 0.05 percent per eight hours in normal times — noticeable but small. In a mania week it can print 0.3 percent per interval; a long held through seven days pays over 6 percent just to keep the position open, before price has moved a cent. The rate is the market telling you which side is crowded.
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FAQ
Is funding the same as interest?
It works similarly for perpetual positions, but it is a market mechanism between traders — not a payment to the exchange.
Can I avoid funding entirely?
Only by closing before funding timestamps or trading dated futures. Spot has no funding, which is why it remains the starting point.
Educational content only — not financial, legal or tax advice. Facts verified October 2026.