Perpetual contracts have become one of the most popular instruments in the cryptocurrency derivatives market, thanks to their unique structure and flexibility. Unlike traditional futures, perpetual contracts do not expire, allowing traders to hold positions indefinitely—provided they manage risks like liquidation and funding fees. But a common question among both new and experienced traders is: Are perpetual contract fees high over the long term? And how can you effectively reduce these costs?
In this comprehensive guide, we’ll explore the cost structure of perpetual contracts, break down key fee components, and provide actionable strategies to minimize expenses while maximizing trading efficiency.
Understanding Perpetual Contracts: No Expiry, But Ongoing Costs
One of the standout advantages of perpetual contracts is the absence of an expiration or settlement date. This means your position remains active as long as you maintain sufficient margin and avoid liquidation. Similarly, open orders stay on the order book until executed or manually canceled.
However, this convenience comes with a trade-off: ongoing funding fees. Because perpetual contracts are designed to track spot prices without physical settlement, exchanges use a mechanism called funding rates to align the contract price with the underlying asset’s spot price.
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How Funding Fees Work in Perpetual Contracts
Funding fees are periodic payments exchanged between long and short positions, typically settled every 8 hours. These fees are not platform profits—they are transfers from one trader to another, designed to balance market sentiment.
Funding Rate Formula (Simplified)
The funding rate is calculated using the following logic:
Funding Rate = Clamp( Moving Average( (Mid-Price - Index Price) / Index Price ) , Min Rate, Max Rate )Where:
- Mid-Price = (Best Bid + Best Ask) / 2
- Index Price = The real-time average spot price across major exchanges
- Clamp ensures the rate stays within predefined bounds (e.g., -0.3% to +0.3%)
If the funding rate is positive, longs pay shorts.
If it’s negative, shorts pay longs.
For example, on major platforms like OKX, funding rates for most perpetual contracts typically range between 0.015% and 0.02% per interval.
Real-World Example
Suppose you hold a $10,000 long position in BTC/USDT perpetual contracts, and the current funding rate is 0.02%. You would pay:
$10,000 × 0.02% = $2 every 8 hoursOver a month (90 settlements), that totals $180 in funding fees—a significant cost if not accounted for in your strategy.
Breakdown of Perpetual Contract Fees
To fully understand long-term costs, it's essential to examine all fee types involved in perpetual trading:
1. Trading Fees (Maker & Taker)
These are charged on every executed trade—both opening and closing positions.
| Fee Type | Maker | Taker |
|---|---|---|
| Standard Rate | 0.02% | 0.04% |
- Maker fees apply when you place a limit order that adds liquidity.
- Taker fees apply when you use a market order that removes liquidity.
Example Calculation: BTC Trade
- Open 200 contracts at $5,000 BTC price (face value: $100)
- Market order (taker):
Opening Fee = (200 × $100 / $5,000) × 0.04% = 0.0016 BTC - Later close at $6,000 with a limit order (maker):
Closing Fee = (200 × $100 / $6,000) × 0.02% = 0.000667 BTC
Total trading cost: ~0.002267 BTC
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2. Funding Fees (Ongoing Cost)
As shown earlier, funding fees accrue every 8 hours. Frequent or prolonged holding during periods of strong bullish sentiment (high positive funding) can significantly increase costs for long-position holders.
Strategies to reduce exposure:
- Monitor funding rates before entering longs or shorts.
- Consider opening positions just after funding settlement (e.g., UTC 00:00, 08:00, 16:00).
- Use short positions when funding is highly positive to earn payments.
3. Delivery Fees (Not Applicable to Perpetuals)
Unlike quarterly or weekly futures, perpetual contracts do not incur delivery fees, since there’s no settlement. This eliminates one layer of cost entirely—making perpetuals more efficient for long-term positioning.
Note: Some users confuse perpetuals with expiring futures. Always confirm the contract type before trading.
Is the Long-Term Cost of Perpetual Contracts High?
The answer depends on three factors:
- Holding Duration
The longer you hold, the more funding fees accumulate. Over weeks or months, even 0.02% per cycle can add up. - Market Conditions
In highly bullish markets, funding often turns sharply positive—increasing costs for longs. Conversely, in bear markets, shorts may pay more. - Trading Strategy
Scalpers and day traders face higher trading fees but minimal funding costs. Swing traders and long-term holders face lower trade frequency but higher cumulative funding.
✅ Bottom Line: Perpetual contract fees are not inherently high, but poor timing or lack of awareness can make them costly over time.
How to Reduce Perpetual Contract Fees
Here are five proven strategies to minimize costs:
1. Use Limit Orders Whenever Possible
Switch from market to limit orders to qualify as a maker, cutting your fee in half (from 0.04% to 0.02%).
2. Time Your Entries Around Funding Settlements
Avoid opening large positions right before funding is due—especially if the rate is extreme. Check the countdown timer on your exchange.
3. Hedge with Funding Rate Arbitrage
When funding is highly positive (>0.1%), consider going short to collect payments from longs.
4. Trade High-Liquidity Pairs
Major pairs like BTC/USDT and ETH/USDT often have tighter spreads and lower effective costs due to deeper order books.
5. Leverage Tiered Fee Discounts
Many platforms offer reduced fees based on:
- 30-day trading volume
- Native token holdings (e.g., holding OKB can reduce fees on OKX)
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Frequently Asked Questions (FAQ)
Q1: Do perpetual contracts charge daily fees?
No fixed "daily fee" exists, but funding fees are charged every 8 hours. So yes, you pay three times per day based on your position size and the current rate.
Q2: Can I avoid paying funding fees?
You can avoid them by closing your position before the funding timestamp (usually on the hour: 00:00, 08:00, 16:00 UTC). However, this disrupts long-term strategies.
Q3: Who pays whom in funding settlements?
If the funding rate is positive, longs pay shorts. If negative, shorts pay longs. The exchange does not take a cut.
Q4: Are trading fees charged on both opening and closing?
Yes. Every executed trade—whether opening or closing a position—is subject to trading fees based on maker/taker status.
Q5: What happens if I hold a perpetual contract for years?
As long as you avoid liquidation and maintain margin requirements, you can hold indefinitely. However, cumulative funding fees may erode profits over time.
Q6: Are perpetual contracts suitable for long-term investing?
They’re better suited for active trading than passive investing due to leverage risks and ongoing costs. For long-term exposure, spot holdings are often safer.
Final Thoughts: Smart Trading Starts with Cost Awareness
Perpetual contracts offer unmatched flexibility in crypto trading—but with great power comes great responsibility. Understanding and managing fees is crucial for sustainable profitability.
By leveraging maker orders, monitoring funding trends, and choosing efficient platforms, you can significantly reduce your trading costs and improve net returns.
Always analyze market trends using tools like daily, weekly, and monthly charts, and consider macro factors affecting digital assets before entering any position. Remember: identifying the trend correctly is half the battle won.
With disciplined risk management and cost control, perpetual contracts can be a powerful tool in your trading arsenal—not a hidden expense trap.