The Economist published a deep dive revealing that positive funding rates can drain more than 10% of a long position’s notional value annually through payments made every eight hours from long holders to short holders. This hidden mechanism creates a compounding cost that is structurally difficult for retail investors to understand. The concept originated with economist Robert Shiller in the early 1990s, but BitMEX launched the first prominent perpetual futures contract in May 2016. The product is now migrating beyond crypto, with platforms like Robinhood exploring integration of perpetual futures for mainstream financial instruments. Leverage dramatically amplifies the cost: a trader using 10x leverage effectively pays 100% of their margin annually in funding fees.
Source: Read the original article
