The Deribit perpetual contracts (also known as perpetuals in industry terminology) are derivative products similar to futures; however, they do not have an expiry date. Because there is no settlement date, an alternative mechanism is required to keep the contract price closely aligned with the underlying index price. This mechanism is called the funding rate. Funding payments are designed to keep the perpetual contract price as close as possible to the underlying crypto price, represented by the relevant Deribit Index. If a perpetual contract trades at a higher price than the index, traders holding long positions pay funding to traders holding short positions. This makes long positions less attractive and short positions more attractive, encouraging the contract price to move back in line with the index. Conversely, if the perpetual trades at a price lower than the index, traders holding short positions pay funding to traders holding long positions.
The Deribit perpetual contract features a continuous measurement of the difference between the mark price of the contract and the relevant Deribit Index. The percentage difference between these two price levels is the basis for the 8-hourly funding rate that is applied to all outstanding perpetual contracts.
Funding payments are calculated every millisecond. The funding payments will be added to or subtracted from the realized PNL account, which is also part of the available trading balance. At the daily settlement, the realized PNL will be moved to or from the cash balance, from which withdrawals can be made.
The total funding paid will show up in the transaction history in the "funding" column. This column shows the funding amount that is applied to the trader's entire net position in the period between the relevant trade and the trade before that. In this sense, the trader can see the funding paid or received on the position between trade timestamps and position changes.
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Standard Margin IM & MM examples Inverse perpetual |
BTC - calculations |
BTC - Margin required |
ETH - Calculations |
ETH - Margin required |
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Initial margin requirement (for Standard Margin. For Portfolio Margin see here.) |
2% + (POS Size in BTC) * 0.005% |
2% + (POS Size in ETH) * 0.0004% |
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Position size 0 |
2% + 0 = 2% |
0 BTC |
2% + 0 = 2% |
0 ETH |
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Position size 25 |
2% + 25 * 0.005% = 2.125% |
25 * 2.125% = 0.53125 BTC |
2% + 25 * 0.0004% = 2.01% |
25 * 2.01% = 0.5025 ETH |
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Position size 350 |
2% + 350 * 0.005% = 3.75% |
350 * 3.75% = 13.125 BTC |
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- |
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Position size 6000 |
- |
- |
2% + 6000 * 0.0004% = 4.4% |
6000 * 4.4% = 264 ETH |
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Maintenance margin requirement (for Standard Margin. For Portfolio Margin see here.) |
1% + (POS Size in BTC) * 0.005% |
1% + (POS Size in ETH) * 0.0004% |
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Position size 0 |
1% + 0 = 1% |
0 BTC |
1% + 0 = 1% |
0 ETH |
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Position size 25 |
1% + 25 * 0.005% = 1.125% |
25 * 1.125% = 0.28125 BTC |
1% + 25 * 0.0004% = 1.01% |
25 * 1.01% = 0.2525 |
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Position size 350 |
1% + 350 * 0.005% = 2.75% |
350 * 2.75% = 9.625 BTC |
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- |
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Position size 6000 |
- |
- |
1% + 6000 * 0.0004% = 3.4% |
6000 * 3.4% = 204 ETH |
When the funding rate is positive, long position holders pay funding to the short position holders; when the funding rate is negative, short position holders pay funding to the long position holders. The funding rate is expressed as an 8-hour interest rate, and is calculated at any given time as follows:
Premium Rate
Premium Rate = ((Mark Price - Deribit Index) / Deribit Index) * 100%
Funding Rate
Sequentially, the funding rate is derived from the premium rate by applying a damper.
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If the premium rate is within -0.025% and 0.025% range, the actual funding rate will be reduced to 0.00%.
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If the premium rate is lower than -0.025%, then the actual funding rate will be the premium rate + 0.025%.
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If the premium rate is higher than 0.025%, then the actual funding rate will be the premium rate - 0.025%.
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Additionally, the funding rate is capped at +/- 0.5%, expressed as an 8-hour interest rate for BTC, and +/- 1% for ETH.
Funding Rate = Maximum (0.025%, Premium Rate) + Minimum (-0.025%, Premium Rate)
Time Fraction
Time Fraction = Funding Rate Time Period / 8 hours
The actual funding payment is calculated by multiplying the funding rate by the position size and the time fraction.
Funding Payment = Funding Rate * Position Size * Time Fraction
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Example 1 |
If the mark price is at USD 10,010 and the Deribit index is at USD 10,000, the funding rate and premium rate are calculated as follows: Premium Rate = ((10,007.50 - 10,000) / 10,000) * 100% = 0.075% Funding Rate = Maximum (0.025%, 0.075%) + Minimum (-0.025%, 0.075%) = 0.075% - 0.025% = 0.05% Let's assume a trader has a long position of USD 10,000 (1 BTC) for 1 minute, and during this minute the mark price remains at USD 10,007.50 and the Deribit index remains at USD 10,000, in this case, the funding calculation for this period is: 8 hours = 480 minutes: Funding Rate = 1/480 * 0.05% = 0.0001041667% Funding Payment = 0.0001041667% * 1 BTC = 0.000001041667 BTC The short position holders receive this amount and the long position holders pay it. |
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Example 2 |
If a trader chose to hold the position of the previous example for 8 hours and the mark price and Deribit index remained at USD 10,007.50 and USD 10,000 for the entire period, then the funding rate would be 0.05%. The funding payment would be paid by the longs and received by the shorts. For 8 hours, it would have been 0.0005 BTC (or USD 5.00). |
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Example 3 |
If the mark price is USD 10,007.50 for 1 minute and then changes to USD 9,992.50 the minute after that, however, the Index remains at USD 10,000, then the net funding in these 2 minutes for a 1 BTC long position is exactly 0 BTC. After the first minute, the trader would pay: 1/480 * 0.05% = 0.0001041667% * 1 BTC = 0.000001041667 BTC, however, the minute after, the trader would receive exactly the same amount. |
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Example 4 |
The mark price is USD 10,002, and the Index remains at USD 10,000. In this case, real-time funding is zero (0.00%) because the mark price is within the +/-0.025% range from the index price(within USD 9,997.50 and USD 10,002.50). This can be checked by using the premium rate and funding rate formulas: Premium Rate = ((10,002 - 10,000) / 10,000) * 100% = 0.02% Funding Rate = Maximum (0.025%, Premium Rate) + Minimum (-0.025%, Premium Rate) = 0.025% - 0.025% = 0.00% |
In reality, the spread of the Deribit BTC Index and the mark price changes continuously, and all changes are taken into account. Therefore, the examples above are extreme simplifications of the actual calculations. The funding paid or received is continuously added to the realized PNL and is moved to or from the cash balance at the daily settlement, at 08:00 UTC.
Fees on Funding
Deribit does not charge any fees on funding. All the funding payments are transferred between the holders of the perpetual contracts. This makes the funding a zero-sum game, where longs receive all funding from shorts, or shorts receive all funding from longs.
When calculating unrealized profits and losses of futures contracts, not always the last traded price of the future is used.
To calculate the mark price, first, we must calculate the EMA (exponential moving average) of the difference between the bounded (around best bid and best ask) mid price and the Deribit Index.
The mark price is calculated as:
Index Price + EMA of the difference between bounded mid price and index price
Mark prices are determined by a mark-to-market model.
Two parameters bound the trading range:
Perpetual trades are limited by Deribit Index + 1 minute EMA (Bounded mid price - Index) +/- 1.5%, and a fixed bandwidth of the Deribit Index of +/- 5%.
If the market circumstances require so, bandwidth parameters can be adjusted at the sole discretion of Deribit.