The Hidden Cost of Rolling Futures Contracts, and How Perpetuals Changed Trading Forever
Traditional futures traders pay a tax they likely don't think about until it is too late: rolling expenses.
Futures contracts are contracts that end at a specific time. This is known as rolling, and the trader will need to close the contract that is expiring and open a new one further out on the chart.
If the market is in contango (far forward contracts cost more than spot contracts), each roll will cost money. That drag slowly wears away returns over a period of months, even when the underlying asset doesn't change much.
The expiration date was eliminated in perpetual futures. Rather than rolling, exchanges employ a funding rate, a periodic payment that is directly exchanged among the long and short position holders, which is usually settled every 8 hours.
If the perpetual price is above the spot price, then longs pay off the shorts. Below spot: shorts pay longs. This is a mechanism that maintains the contract attached to the underlying asset without any rollover occurring.
The data from CoinGecko Research shows that the trading volume of crypto perpetual futures rose from approximately $4.14 trillion in January 2024 to approximately $7.24 trillion in January 2026, increasing by 75% over two years.
Even faster, the volume of decentralized perpetuals went up from $81.74 billion to $739.48 billion in the same period.
Not funding rates are free money either. If allowed to run in one direction for 24 hours a day, the low rate of 0.05% per eight-hour window results in an annualized cost of nearly 55%.
Traders did not take off cost for nothing; they took off roll cost for funding cost.
It is essential to know that one of the mechanics mentioned above applies to a specific contract, expiry roll cost, or continuous funding before initiating any leveraged position.
For this reason, both mechanisms are present. At the end of contracts, rolling ensures contracts remain in good faith. It would be perfectly unfair to leave the perpetuals unchecked. But they're not free, and they're how little edges get lost in a trading year.
Ever surprised by the funding costs on a perpetual position?
Not financial advice.
