Perpetual contracts have become one of the most popular instruments in cryptocurrency derivatives trading. Unlike traditional futures, they don’t expire—meaning traders can hold positions indefinitely. However, maintaining an open position for an extended period, such as a full year, incurs ongoing costs that can significantly impact profitability. This guide breaks down how much it might cost to hold a perpetual contract for a year and explains the calculation process step by step.
What Is a Perpetual Contract?
A perpetual contract is a type of derivative product that allows traders to speculate on the price of an underlying asset—like Bitcoin or Ethereum—without owning it. The key feature that sets it apart from standard futures is the absence of an expiration date. Traders can keep their positions open as long as they meet margin requirements.
To ensure the contract price stays close to the spot market price, perpetual contracts use a mechanism called funding rate. This rate determines periodic payments between long (buy) and short (sell) holders. These payments are settled every 8 hours on most major platforms.
👉 Discover how funding rates work and manage your position costs effectively.
Components of Perpetual Contract Fees
When evaluating the total cost of holding a perpetual contract for a year, two primary types of fees must be considered:
- Opening fee (taker/maker fee)
- Funding fee (holding cost)
Let’s explore each in detail.
1. Opening Fee
Every time you open a position—whether long or short—the exchange charges an opening fee, also known as a taker or maker fee depending on order type.
- Taker fee: Applies when your order matches an existing one in the order book.
- Maker fee: Applies when you place a limit order that adds liquidity.
Most traders act as takers, so we’ll focus on that rate.
For example:
- Suppose the taker fee is 0.05%.
- You open a position worth $10,000.
- Your opening fee = $10,000 × 0.05% = **$5**.
This fee is paid only once per trade unless you close and reopen the position.
2. Funding Fee (Holding Cost)
The funding fee is what makes holding perpetual contracts over long periods costly—or potentially profitable, depending on market conditions.
Funding rates are typically settled every 8 hours, three times per day. The direction of payment depends on whether the rate is positive or negative:
- Positive funding rate: Longs pay shorts.
- Negative funding rate: Shorts pay longs.
This mechanism helps align the contract price with the underlying spot price.
Example Calculation
Assume:
- Contract value: $10,000
- Funding rate: 0.01% per 8-hour period
- Number of settlements per day: 3
Each funding payment = $10,000 × 0.01% = **$1**
Daily funding cost = $1 × 3 = **$3**
Annual funding cost = $3 × 365 = **$1,095**
So, just from funding fees alone, you’d pay **$1,095** in a year on a $10,000 position—if the funding rate remained constant at 0.01%.
⚠️ Note: In reality, funding rates fluctuate based on market demand, leverage, and sentiment. Rates can go negative, meaning you’d earn money as a short during periods of high long dominance.
Total Cost of Holding a Perpetual Contract for One Year
Now let’s combine both components to estimate the total annual cost.
Using our earlier example:
- Opening fee: $5
- Annual funding cost: $1,095
- No closing fee (assuming no exit)
Total annual cost = $5 + $1,095 = $1,100
That’s 11% of your initial position value—just in fees.
👉 Use real-time tools to estimate your potential holding costs before entering a trade.
Factors That Influence Total Cost
Several variables affect how much you’ll actually pay over 12 months:
| Factor | Impact |
|---|---|
| Funding rate volatility | Rates change hourly; averages vary across bull/bear markets |
| Position size | Larger positions increase absolute fee amounts |
| Leverage used | Doesn’t directly affect fees but increases liquidation risk |
| Market conditions | In strong bull markets, longs often pay high funding |
| Exchange platform | Different platforms have varying fee structures |
In highly volatile or bullish markets, funding rates can spike to 0.1% or higher per 8-hour period. At 0.1%, the same $10,000 position would incur:
- Per session: $10
- Daily: $30
- Annual: $10,950 — more than the entire position value!
Conversely, in bearish markets, funding rates often turn negative, allowing short holders to collect income.
Strategies to Minimize Holding Costs
Understanding these costs enables smarter trading decisions. Here are some practical tips:
- Monitor funding rate trends: Avoid opening long positions when funding is excessively high.
- Trade during low-funding windows: Some traders time entries around funding settlement times.
- Consider shorting in high-long environments: You may earn funding instead of paying it.
- Use limit orders: Reduce opening fees by acting as a maker.
- Hedge with spot holdings: If you own crypto, going short on perpetuals can generate yield.
Frequently Asked Questions (FAQ)
Q: Do I get charged funding fees even if I don’t trade?
Yes. As long as you have an open perpetual contract position, you will be charged (or paid) funding every 8 hours based on the current rate.
Q: Can holding a perpetual contract be profitable despite fees?
Absolutely. If price movement in your favor exceeds the cumulative fees, your net profit remains positive. For example, a 50% price gain likely outweighs even high funding costs.
Q: Are funding rates the same across all exchanges?
No. Different platforms have independent funding mechanisms and rates. Arbitrage opportunities sometimes exist between exchanges.
Q: Is there a way to predict future funding rates?
Not precisely. However, persistent premiums in contract prices often signal upcoming high or negative funding rates. Monitoring open interest and order book depth helps anticipate shifts.
Q: Does leverage affect funding fees?
No. Funding fees are based on position value, not leverage level. However, higher leverage increases liquidation risk during adverse moves.
Q: Can I avoid funding fees entirely?
Only by avoiding perpetual contracts or closing your position before each funding timestamp (every 8 hours). This is impractical for most investors and increases transaction costs.
👉 Stay ahead with live market data and predictive analytics for smarter perpetual trading.
Final Thoughts
Holding a perpetual contract for a year involves more than just watching price charts—it requires understanding the hidden cost structure behind continuous funding payments. While opening fees are minimal, recurring funding fees can accumulate rapidly, especially in trending markets where one side dominates.
Smart traders don’t just analyze entry and exit points—they also evaluate the sustainability of holding costs over time. By monitoring real-time funding rates, adjusting position timing, and choosing optimal strategies (like shorting during high-long sentiment), you can turn potential expenses into income opportunities.
Whether you're planning to hold a long-term hedge or ride a macro trend, always factor in the full cost of carry before committing capital.
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