Crypto perpetual futures are contracts with no fixed expiry. Traders can hold them indefinitely, subject to the exchange’s rules, while periodic funding payments are designed to encourage the contract price to track a reference spot market. Leverage lets a trader control a larger position than their posted margin, but losses—or, on some venues, funding debits—can reduce that margin enough to trigger liquidation.
What is a crypto perpetual futures contract?
A perpetual futures contract is a derivative that tracks an asset such as bitcoin but has no scheduled expiration or settlement date. Unlike a dated futures contract, it does not converge with the spot market through an expiry event. Instead, exchanges use funding payments between long and short holders as an incentive to keep the contract price near a reference market price. Funding can encourage convergence, but it does not guarantee that the contract and spot prices will match at every moment.
The Commodity Futures Trading Commission’s 2021 staff paper, Who Trades Bitcoin, describes funding as periodic payments between holders of opposing positions. The details are set by each venue and contract.
What is a funding rate, and who pays it?
A funding rate is a rate applied to a position’s value to calculate a payment between long and short contract holders. Under Bybit’s documented rules, the funding fee is position value multiplied by the funding rate. A positive rate means longs pay shorts; a negative rate means shorts pay longs. The rate is not a forecast of which way the asset price will move, nor is funding guaranteed income: who pays depends on the rate at the relevant settlement time.
Recommended Free Tools
#1 Best Overall
- Language: english
- Book - trading: technical analysis masterclass: master the financial markets
- It is made up of premium quality material.
| Funding rate | Typical payment direction under Bybit’s rules |
|---|---|
| Positive | Long holders pay short holders. |
| Negative | Short holders pay long holders. |
For illustration, if a position’s value at settlement is $10,000 and the applicable rate is 0.01%, the payment is $1. This example applies the stated formula; it is not a quoted exchange rate or a prediction of what a trader will pay. The actual position value, rate, timing, and treatment of the payment depend on the contract’s rules.
Why the rate changes
Bybit describes its rate as combining an interest component and an average premium index, and Binance describes its rate as combining interest and a premium component. These are examples of exchange-specific methods, not a universal formula. A premium component reflects the relationship between the contract and its reference market; as market conditions change, the calculated rate can change too.
Rank #2
- As a day trader, you can live and work anywhere in the world. You can decide when to work and when not to work.
- You only answer to yourself. That is the life of the successful day trader. Many people aspire to it, but very few succeed. Day trading is not gambling or an online poker game.
- To be successful at day trading you need the right tools and you need to be motivated, to work hard, and to persevere.
When funding is calculated and settled
Do not assume every perpetual settles funding every eight hours. Bybit’s contract rules list 00:00, 08:00, and 16:00 UTC funding timestamps for the contracts covered by that documentation; its funding help article gives an eight-hour example and says rate calculations update during the interval. Binance says settlement intervals can differ from the default and documents automatic interval changes for some USDⓈ-M contracts when rates reach specified caps or floors. These rules can vary by venue and contract, so check the contract’s current funding rate, next-funding display, and settlement schedule.
How do leverage and liquidation work?
Leverage gives a position exposure larger than the margin posted to support it. If the position moves against the trader, losses reduce the equity available to support it. When that equity or margin falls below the venue’s maintenance requirement, the exchange can close the position under its risk rules. That forced close is a liquidation.
Windows Errors? Fix Them Before They Spread
Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallOutdated Drivers Are Slowing You Down
One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchThere is no single liquidation-price formula that applies to every crypto perpetual. The result can depend on the contract, margin mode, risk tier, collateral, fees, funding, and venue calculations. A liquidation price shown in an interface is therefore specific to that position and the exchange’s assumptions, not a universal threshold for the asset.
Why the mark price matters
The last traded price is the price of the most recent transaction; a mark price is a separate valuation used in some exchanges’ risk calculations. Bybit’s documentation says its mark price triggers liquidation and describes it as an index-based fair-price mark, with the index derived from weighted spot-market quotes. That is Bybit’s implementation, not a rule for all exchanges. When comparing venues, check which price triggers liquidation and how the venue calculates it.
How funding can affect liquidation risk
Funding is a payment, so it can change the balance available to support a position. Binance says funding is first deducted from the available Futures Account balance and, if that balance is insufficient, may be deducted from position margin; its documentation notes that this can affect liquidation price. Other venues may handle funding and margin differently. A trader should account for possible funding debits as well as market losses when reviewing available margin.
The CFTC staff paper warns that comparatively high leverage can make a modest adverse market move sufficient to cause a forced liquidation at a loss. Its leverage examples are historical and should not be treated as current exchange limits.
What to check before comparing perpetual contracts
Two contracts tracking the same asset can have materially different funding, pricing, and liquidation rules. Compare the specific contract pages rather than relying on the word “perpetual” or a platform-wide summary.
- Funding: Review the rate formula, current rate, next settlement time, settlement cadence, and any rate caps or interval adjustments.
- Reference and mark prices: Find the reference index and the price used to calculate unrealized profit and loss or trigger liquidation.
- Margin and risk tiers: Check initial and maintenance margin requirements, position-size tiers, margin mode, and the venue’s liquidation process.
- Collateral and denomination: Confirm what collateral supports the position and whether the contract and its profit, loss, or funding are denominated in the asset, a stablecoin, or another currency.
- Location and eligibility: Verify whether the product is available to you under current rules where you live. The CFTC’s 2021 staff paper discusses U.S. access and differences between perpetual swaps and CME Bitcoin futures, but it is not a current legal determination or advice about present eligibility.
For any open position, use the venue’s current contract rules and position display to check the applicable funding rate, mark price, margin requirement, and liquidation information. Those are more useful than assuming another exchange’s settings apply.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
