Perpetual futures and funding.
Almost all crypto leverage trades through perpetual futures — contracts that never expire. The trick that makes them work is the funding rate, and that same mechanism is what lets us read the crowd. Here’s how it fits together.
A future that never ends
A traditional future has a settlement date — you agree on a price for delivery next month. A perpetual future strips out the expiry: it tracks the coin’s price and you can hold it forever. That convenience is why perps dominate crypto trading volume. But it creates a problem: with no expiry to force the contract price back to reality, what stops it from drifting away from the real spot price?
Funding does the job expiry can’t
The answer is the funding rate — a small fee exchanged directly between traders, not paid to the exchange. The logic is self-correcting:
- Perp trading above spot → too much demand to be long → funding goes positive, longs pay shorts → being long gets expensive → price pulled back toward spot.
- Perp trading below spot → funding goes negative, shorts pay longs → the opposite pull.
So funding is the price of being on the popular side. The more lopsided the positioning, the more that side pays.
A window into the crowd
Because funding is set by the imbalance between longs and shorts, it’s a live read of where the crowd is leaning and how hard — paid for in real money, not sentiment surveys. That’s exactly the raw material Ioxer uses: we take the 7-day funding on every liquid coin and turn it into a funding-crowding read, then rank the field.
Expiry was the old way to keep a future honest. In perps, funding took its place — and handed us a crowding signal as a side effect.
Common questions
What is a perpetual future?
A perpetual future (or "perp") is a derivatives contract that tracks a coin’s price but, unlike a traditional future, never expires. You can hold it indefinitely. To keep its price from drifting away from spot, exchanges use a funding rate instead of an expiry date.
How does the funding rate keep a perp near spot?
When the perp trades above spot (more demand to be long), the funding rate turns positive and longs pay shorts — which discourages longs and pulls the price back toward spot. When the perp trades below spot, funding turns negative and shorts pay longs. It’s a continuous balancing fee.
How often is funding paid?
On most venues, every 8 hours — so three times a day. Ioxer uses the trailing 7-day average funding per coin to smooth out single-period noise and read the persistent crowding, not a one-off spike.
Ioxer is research, not investment advice. IOX is a crowding read — not a price prediction, not a buy/sell signal.