What a perpetual future is, in one paragraph
A perpetual future (or "perp") is a derivative contract that lets you take a leveraged long or short position on a crypto asset, with one critical difference from traditional futures: it never expires. You hold it for one minute or one year, your choice.
Because there's no expiry, the contract needs a way to stay anchored to the spot price. Without an anchor, the perp price would drift wherever speculation pushes it. The anchor mechanism is the funding rate: a small payment between longs and shorts every funding interval, sized to push the perp back toward spot when it deviates.
That single mechanism — funding rate — is what makes perpetuals tradeable, and it's what makes funding rate arbitrage possible.
The funding mechanism, with numbers
Suppose BTC spot is at $60,000 and the BTC perp on Hyperliquid is trading at $60,090. The perp is 0.15% above spot — there's extra long demand pushing the contract up.
The funding mechanism kicks in. Hyperliquid calculates a funding rate proportional to the gap, say +0.04% / hour. Every hour, longs pay shorts that 0.04% of position size.
What happens next: longs facing a continuous fee start to close. Shorts facing free money start to open. Both flows push the perp price down toward spot. The funding rate shrinks as the gap closes. By next funding interval, perp might be at $60,005, gap is 0.008%, funding drops to +0.002%. Equilibrium.
Multiplied across 8,760 hours per year, even a small persistent funding rate compounds — a constant +0.04%/hr is roughly +350% APR. Funding rates are a major cost (and major income stream) at scale.
Leverage and liquidation
Most perpetual venues let you trade with 1x to 100x leverage. At 10x, $1,000 of collateral opens a $10,000 position. Your P&L is calculated on the full $10,000.
The cost of leverage: liquidation. If the position moves against you by enough that your collateral is no longer sufficient to cover potential losses, the venue force-closes you at the liquidation price. At 10x leverage, that's roughly a 9-10% adverse move. At 50x, ~1.5-2%. At 100x, <1%.
For most retail traders, 3-5x leverage is the upper end of survivable. Anything higher means you're paying for the privilege of being liquidated by normal market noise. The screener shows mark price and OI per venue so you can size positions conservatively relative to liquidity depth.
Long vs short, in plain language
Long. You believe the price will go up. You open a long perpetual position. If price rises 5%, you make 5% × leverage on your collateral. If it falls 5%, you lose 5% × leverage.
Short. You believe the price will go down. You open a short. Same math, opposite direction. If price falls 5%, you make. If it rises 5%, you lose.
The asymmetry: funding. If funding is positive, longs pay shorts continuously while the position is open. So a long needs the price to rise more than the funding cost to be net-profitable. A short with positive funding gets paid to wait — even sideways action makes money.
This is why the funding rate matters even for directional traders. A long during high positive funding is fighting the current. A short during deep negative funding is fighting the squeeze. The screener's 7D average funding column tells you what regime you're in.
Why traders watch funding rates
1. Cost-of-carry input. Funding is the variable cost of holding a leveraged position. Without checking it, you can't price your hold.
2. Positioning signal. Extreme positive funding = crowd is heavily long = contrarian short signal. Extreme negative funding = crowd heavily short = contrarian long signal. See our negative funding rates guide for the full thesis.
3. Arb opportunities. Cross-venue spreads (one venue paying high, another paying low on the same asset) let you capture funding in a delta-neutral way. See our funding arbitrage guide for mechanics.
4. Regime detection. Funding flipping from positive to negative across most venues simultaneously is one of the cleanest sentiment shift signals available — usually precedes a meaningful move.
Where to start
1. Open /dashboard/funding. Look at the table. Notice that BTC funding on Binance is different from BTC funding on Hyperliquid. That gap is the entire game.
2. Click into BTC. See the 7-day history per venue. Notice the venues that are usually extreme (Hyperliquid, Lighter) vs the venues that hover near zero (Binance, OKX).
3. Read the scanner overview to see what filters and presets are available, and the arbitrage guide for how the spread becomes a strategy.
4. Don't actually trade until you've watched the data move for a couple of days. Funding regimes shift; what looks like easy money on Tuesday is gone by Friday. The boring part of perp trading is the difference between people who survive and people who don't.