What are perpetual futures, and how does the funding rate work?
Perpetual contracts have become a dominant form of crypto derivative, yet they never expire. A small, regular payment between buyers and sellers is what keeps their price tied to the real asset, and it can quietly add up.
Education only, not investment, tax or legal advice. Crypto-assets are high-risk — risk disclosure.
The short answer
A perpetual future is a contract on a crypto-asset's price with no expiry date. To keep its price near the spot price, traders on one side pay the other a periodic funding rate: when the contract trades above spot, longs pay shorts; when it trades below, shorts pay longs.
Key takeaways
- Perpetual contracts are derivatives with no fixed expiry date that use a periodic funding payment to stay close to the spot price.
- When the perpetual trades above spot, long positions pay short positions; when it trades below, the payment flips.
- Funding is a running cost or income on top of trading fees, and on a leveraged position it can take a noticeable share of the deposit.
- Perpetuals have become the dominant crypto derivative, mostly on offshore venues; the CFTC set out a US listing policy in May 2026.
What is a perpetual future?
An ordinary futures contract is an agreement to buy or sell an asset on a future date at a price fixed today7. At expiry, the futures price and the spot price must meet5. A perpetual contract removes the date. The CFTC describes perpetuals as derivatives with no fixed expiration date that rely on a periodic funding rate mechanism, rather than expiry, to keep their price in line with the underlying asset's spot price1.
That design lets a trader hold a leveraged long or short position on bitcoin for as long as they like without rolling from one contract to the next. It has proved popular. In its May 2026 policy statement, the CFTC said perpetual contracts have become a dominant form of crypto derivative trading in global markets, and that most of that trading has developed on venues outside the United States1. For the bigger picture on contracts versus coins, see our explainer on spot versus derivatives.
Dated futures and perpetuals side by side
| Feature | Dated futures | Perpetual contract |
|---|---|---|
| Expiry | Fixed date in the future7 | None1 |
| What ties price to spot | Convergence at expiry | Periodic funding payments1 |
| Holding cost | The basis between futures and spot8 | Funding paid or received at each interval1 |
| When the reference price matters | Mainly at expiry | At every funding interval1 |
How does the funding rate work?
The funding rate is a periodic payment between the long and short sides of the contract. Its direction and size generally depend on the gap between the perpetual's market price and the asset's spot price1. The rule of thumb is simple: when the perpetual trades above spot, traders with long positions pay and traders with short positions receive; when it trades below spot, the reverse happens1.
The point of the payment is to give someone a reason to close the gap. If shorts are being paid, more traders are tempted to open short positions, often while buying the coin on the spot market to stay neutral, and that selling pressure pulls the perpetual's price back towards spot. The CFTC describes the payments as an economic incentive to arbitrage away the price difference by taking whichever side is collecting1.
How often funding is calculated is set by each exchange in its contract rules. For example, in a June 2025 filing with the CFTC, the regulated exchange Coinbase Derivatives said funding on its perpetual-style bitcoin future is calculated every hour and collected in the clearing house's mid-day and end-of-day margin runs9. Other venues can use different intervals, which is why the example below states its own assumption.
Figure · How funding pulls the price back
- 01Perp above spotcontract at a premium
- 02Longs pay shortsfunding is positive
- 03Arbitrage tradersshort perp, buy spot
- 04Gap narrowsperp moves to spot
↻ then back to step 01
How much can funding cost over a month?
A funding rate looks tiny because it is quoted per interval, but it applies to the full size of the position, not just your deposit, and it repeats. The example below uses made-up numbers to show the arithmetic.
Worked example
Holding a 10,000-dollar long for a month
You post 1,000 dollars of margin and open a 10,000-dollar long perpetual position (10x leverage). Assume funding is +0.01% per interval and there are three intervals a day.
Each interval: 10,000 × 0.0001 = 1 dollar paid to shorts.
Each day: 3 dollars. Over 30 days: 90 dollars.
That is 0.9% of the position, but 9% of your 1,000-dollar deposit, before any price move or trading fee.
If funding were −0.02% instead, your long would receive 2 dollars per interval. Illustrative assumptions only; calculated in code.
Checking funding before you open a position
- 1
Find the current and recent funding rate
Check the rate for the next interval and its recent history, because funding can change sign.
- 2
Note the interval
Work out how many payments fall in a day on that venue.
- 3
Multiply by the full position size
Use the notional value, not your margin, and scale up to the time you expect to hold.
- 4
Compare with your deposit
Express the total as a share of your margin. That is the drag funding puts on a leveraged trade.
What are the risks of trading perpetual futures?
Funding is only one cost. Leverage adds another layer of risk. BIS economists found that the leverage available on crypto-native exchanges is very high and significantly exceeds that on the CME, and that forced closures of futures positions, known as liquidations, spike when prices fall5. The CFTC warns more generally that leverage amplifies risk and that trading on margin can lose more than you first invested6.
Perpetuals also depend heavily on the price index they reference. The CFTC points out that, unlike a traditional future that needs a reliable reference price mainly at expiry, a perpetual needs one at every funding interval, without interruption1. And because most perpetual trading happens offshore1, a customer may have little protection if the platform fails6.
Risk warning
Leveraged perpetuals can wipe out a deposit quickly
A modest price move against a highly leveraged position can trigger liquidation, and funding can keep charging while you wait. The CFTC notes that many individuals who trade futures lose all their money7. Check that a platform is authorised where you live, and read our risk disclosure. You can model the effect of leverage with our leverage calculator.
Are perpetual futures regulated in the US?
For years, most perpetual trading happened outside the United States1. On 21 April 2025, CFTC staff asked the public for comment on the trading and clearing of perpetual-style derivatives, including their benefits and the risks to market integrity, customer protection and retail traders4.
On 29 May 2026 the CFTC announced two decisions. It approved a bitcoin perpetual contract, BTCPERP, submitted by the regulated exchange KalshiEX, treating it as a futures contract that references the spot price of bitcoin2. The approval order describes funding payments based on the gap between the contract's mark price and a reference index, the CF Benchmarks Bitcoin Real Time Index, with cash settlement and trading 24 hours a day, seven days a week3. The CFTC also issued a policy statement saying perpetual contracts on asset classes beyond that order would be reviewed case by case1.
For how the CFTC's remit compares with the SEC's, see our explainer on the SEC and the CFTC.
What mistakes do beginners make with funding rates?
Common beginner mistakes
Ignoring funding because the rate looks tiny
A fraction of a percent per interval, charged on the full position at every interval, adds up over weeks.
Applying the rate to the margin, not the position
Funding is calculated on the notional size. With 10x leverage, the cost relative to your deposit is ten times larger.
Assuming the sign never changes
Funding can flip from positive to negative. A position that earned funding last week can pay it this week.
Treating funding income as safe yield
Collecting funding means holding a derivative position that can lose value, and be liquidated if leveraged. It is payment for taking risk, not interest.
Frequently asked questions
Who receives the funding payment?
Do I pay funding if I close before the funding time?
It depends on the contract rules. Check your platform's contract specification to see whether funding is charged only to positions open at set times or accrues continuously.
What does a positive funding rate mean?
It means the perpetual is trading above the spot price, so longs are paying shorts1. It describes the current gap; it does not predict where the price will go next.
Is a perpetual future the same as a spot bitcoin ETF?
No. A perpetual is a leveraged derivative contract with funding payments. A spot bitcoin exchange-traded product holds bitcoin and trades as shares on a stock exchange. Our spot bitcoin ETF explainer covers that product.
The bottom line
A perpetual future is a futures contract without an end date, held near the spot price by a funding payment that flows from longs to shorts when the contract is expensive and back again when it is cheap. Treat funding as a real, recurring cost calculated on your full position, and remember that leverage, liquidation and the platform itself are bigger risks still.
Sources
- Policy Statement Concerning the Listing of Perpetual Contracts — U.S. Commodity Futures Trading Commission, 2026 Primary source
- CFTC Approves BTCPERP Contract Submitted by KalshiEX, LLC — U.S. Commodity Futures Trading Commission, 2026 Primary source
- Order approving the BTCPERP contract submitted by KalshiEX LLC — U.S. Commodity Futures Trading Commission, 2026 Primary source
- CFTC Staff Seek Public Comment Regarding Perpetual Contracts in Derivatives Markets — U.S. Commodity Futures Trading Commission, 2025 Primary source
- Crypto carry (BIS Working Paper No. 1087) — Bank for International Settlements, 2023 Primary source
- Customer Advisory: Understand the Risks of Virtual Currency Trading — U.S. Commodity Futures Trading Commission Primary source
- Basics of Futures Trading — U.S. Commodity Futures Trading Commission Primary source
- CFTC Glossary — U.S. Commodity Futures Trading Commission Primary source
- Submission 2025-32: Listing of the nano Bitcoin Perp Style Futures (self-certification filed with the CFTC) — Coinbase Derivatives, LLC, 2025 Primary source
How we checked this page: every figure above links to the numbered source it came from. Spotted an error? Tell the desk — see our editorial policy.
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