Funding rates on XXKK perpetuals, how they’re paid, how to estimate the cost, and when to step aside

Holding a perpetual can feel like renting a position. Sometimes you get paid rent, sometimes you pay it. That “rent” is perpetual funding rates, and it’s one of the biggest hidden drivers of PnL for active derivatives traders. If you trade XXKK perpetuals on the xxkk crypto exchange, you don’t need an advanced math background to manage funding. You need clean definitions, a simple way to estimate cost, and a plan for what to do when funding turns extreme. This guide breaks down how funding is paid, how to estimate daily and weekly carry, and when stepping aside is the best trade. What funding is (and why perpetuals need it) Infographic showing how perpetual prices stay tethered to the spot index, and how funding flows between longs and shorts, created with AI. Perpetuals don’t expire, so they don’t “snap back” to spot at settlement like dated futures. Funding exists to keep the perpetual price close to the underlying spot market. The basic idea is simple: If perp demand is heavy on the long side, the perp price tends to trade above spot, and longs usually pay shorts. If perp demand is heavy on the short side, the perp price tends to trade below spot, and shorts usually pay longs. Funding isn’t typically paid to the exchange. It’s a transfer between traders, designed to pull price back toward the index. If you want a deeper conceptual overview, this explainer on what funding rates are in crypto markets lays out the same mechanism in plain language. The five terms that make funding math easy If you only memorize one thing, make it notional × rate. But first, the vocabulary. Notional (position notional)The dollar value of your position. In generic terms:Notional ≈ Position size × Mark price.Example: 0.5 BTC at a $60,000 mark price has about $30,000 notional. Funding rateThe percentage applied to your notional each funding event. It can be positive or negative. The sign tells you who pays whom. Funding intervalHow often funding is exchanged (for example, many venues use three times per day, but always follow the interval shown in your contract specs). Your cost depends on how many intervals you sit through. Mark priceA fair reference price used for liquidation and (often) funding notional. It’s designed to be harder to manipulate than last traded price, smoothing out wicks. Index priceA reference spot price, typically built from one or more spot markets. It’s meant to represent “real” spot value, and it anchors the perp. For more detail on how mark and index are used in perp funding designs, the Funding Rate Mechanism documentation gives a solid, product-style breakdown. How funding is paid (generic formula, no quirks) Most perps follow the same core calculation. Keep it generic and you can estimate quickly, even before you enter. 1) Estimate position notionalNotional ≈ Quantity × Mark price 2) Funding payment per intervalFunding Payment = Notional × Funding Rate 3) Direction of payment If funding rate > 0: Longs pay shorts If funding rate < 0: Shorts pay longs One key point traders miss: leverage doesn’t change the absolute funding payment if your notional is the same. Leverage changes your margin posted, so it changes your ROI, but the funding transfer is still based on notional. Two numeric scenarios (and how leverage changes ROI, not the bill) Visual comparison of funding costs under positive vs negative rates for different notionals, created with AI. Scenario A: Positive funding (long pays), small notional Assume: Notional: $10,000 long Funding rate: +0.05% per interval (0.0005) Intervals per day: 3 (common schedule, use your market’s actual number) Per interval funding payment:$10,000 × 0.0005 = $5 Per day funding cost:$5 × 3 = $15 per day Now the leverage punchline: At 1x, you might post roughly $10,000 margin, so $15/day is about 0.15%/day on margin. At 10x, you might post roughly $1,000 margin, the funding is still $15/day, which is about 1.5%/day on margin. Same notional, same funding dollars, very different ROI impact. Scenario B: Negative funding (short pays), larger notional Assume: Notional: $50,000 short Funding rate: -0.03% per interval (0.0003 in magnitude) Intervals per day: 3 When funding is negative, shorts pay longs, so this short pays: Per interval funding payment:$50,000 × 0.0003 = $15 Per day funding cost:$15 × 3 = $45 per day If you were long $50,000 instead, you’d expect to receive about $45/day (before fees, and ignoring price movement). That’s why negative funding can attract “funding capture” longs, and why those trades can get crowded fast. Estimating daily, weekly, and annualized funding (then comparing to your edge) Funding is a carry cost. Treat it like one. The fastest way is to convert the interval rate to a daily rate: Daily funding rate ≈ Funding rate per interval × Intervals per dayDaily funding cost ≈ Notional × Daily funding rate Here’s a quick reference: What you want Simple estimate Per interval payment Notional × r Daily payment Notional × r × N Weekly payment Notional × r × N × 7 Annualized rate (rough) r × N × 365 (r = funding rate per interval, N = intervals per day) How to compare funding to expected edge:Write down the return you realistically expect from the setup, then subtract carry. Example: You expect +0.30% over the next day from a trend setup. Funding is costing you 0.15% per day. Your “edge after carry” is about +0.15%, before fees and slippage. If your expected move shrinks or funding jumps, the trade quality changes even if your chart looks the same. If you want to sanity-check how professionals talk about funding as a market data series, Coin Metrics’ overview on funding rates is useful context. When high funding stops being a cost and becomes a warning Risk map of what tends to show up when funding gets extreme, created with AI. Funding isn’t only a fee. It’s also a crowd meter. Watch for these risk patterns: Crowded-trade signal: Funding rises while price grinds up slowly. That often means leveraged longs are piling in late. A sharp dip can trigger forced selling. Funding spikes: Sudden jumps often happen near breakout euphoria or news candles. Spikes can fade quickly, so a position that looked fine can become expensive within hours. Liquidation cascades: When the trade is one-sided, small drops can trigger liquidations, which push price lower, which triggers more liquidations. Slippage and spread widening: Around major volatility or funding timestamps, liquidity can thin out. Market orders get punished, stops slip, and “cheap” hedges get expensive. A simple “step aside” playbook (rules of thumb) No rule fits every market, but having triggers beats hoping funding “calms down.” If you’re long and funding is above +0.10% per interval, treat it as a crowded long warning. Reduce size, tighten exposure time, or hedge. If you’re short and funding is below -0.10% per interval, assume shorts are crowded. Be careful with aggressive adds into weakness. If annualized funding is above 50%, only hold if your expected edge clearly beats it (and you’re comfortable with squeeze risk). If funding jumps 3x within a day, stop adding. Re-check the setup with fresh eyes, especially if open interest is rising. If spreads widen or slippage increases near funding time, don’t force entries. Use limit orders, or wait for liquidity to return. If price is flat but funding stays extreme, that’s often the market paying you (or charging you) to take the other side. Respect it. Stepping aside isn’t quitting. It’s refusing to pay premium rent when the building is on fire. Conclusion Perpetual funding rates are predictable enough to plan around, but dangerous enough to ignore only once. Learn the five key terms, keep the notional-based formula handy, and convert interval funding into daily and weekly carry before you commit size. When funding turns extreme, treat it as both a cost and a positioning signal. The best move is often to cut exposure, shorten holding time, or simply wait for funding and liquidity to normalize. Disclaimer: This article is for education only and isn’t financial advice.