What it is
Funding-rate carry is the market-neutral trade behind most "delta-neutral yield" products. Perpetual futures have no expiry, so exchanges keep the perp price near spot with a funding payment every 8 hours: when the perp trades above spot, longs pay shorts; when below, shorts pay longs. The carry trade holds spot (long) and an equal-sized perp short. Price moves cancel out, and the position collects funding whenever it is positive, which in a bull market is most of the time. It earns nothing from being right about direction; it earns from other people's leverage.
This is not a leverage trade and you cannot run it on a paper desk that has no funding. We include it because it is the honest benchmark for every directional method on this board: if a strategy cannot beat the carry with less drawdown, it is not worth the stress.
Rules
- Market: a BTC or ETH perpetual on an exchange that pays funding, plus the spot asset on the same exchange (or a tokenized equivalent).
- Entry: buy X units of spot, sell X units of perp. Do it when funding has been positive for several periods and the annualized rate is above what you could earn elsewhere.
- Exit: when funding turns negative for a sustained stretch (the table shows how rare that has been), or when the annualized rate falls below your cost of capital plus fees.
- Stop: none for price. The risk is operational: the perp short needs enough margin to survive a sharp rally (keep leverage on the short leg at 2x or less) and the exchange must stay solvent.
- Position size: full size on both legs, identical quantity. Rebalance after large moves so the legs stay equal.
Chart example
Evidence
Binance USD-M perpetual funding history, BTCUSDT and ETHUSDT, every 8-hour period from 2023-10-20 to 2026-10-19 (3,285 periods per coin). "Sum of funding" is what a spot-long, perp-short position of fixed notional would have collected before fees. Annualized figures assume 1,095 periods a year.
| Market | Year | Funding periods | Share positive | Carry earned (% of notional) | Annualized | Worst 30-day stretch | Best 30-day stretch |
|---|---|---|---|---|---|---|---|
| BTC | 2023 (Oct to Dec) | 217 | 100% | 2.98% | 15.1% | 0.00% | 1.66% |
| BTC | 2024 | 1,098 | 92% | 11.96% | 11.9% | −0.07% | 3.22% |
| BTC | 2025 | 1,095 | 87% | 5.13% | 5.1% | 0.00% | 0.77% |
| BTC | 2026 (to Oct 19) | 875 | 74% | 2.35% | 2.9% | −0.30% | 0.63% |
| BTC | all three years | 3,285 | 86% | 22.42% | 7.5% | ||
| ETH | 2023 (Oct to Dec) | 217 | 100% | 3.26% | 16.5% | 0.00% | 1.81% |
| ETH | 2024 | 1,098 | 96% | 13.00% | 13.0% | 0.00% | 3.23% |
| ETH | 2025 | 1,095 | 84% | 4.93% | 4.9% | 0.00% | 0.78% |
| ETH | 2026 (to Oct 19) | 875 | 70% | 1.59% | 2.0% | −0.33% | 0.51% |
| ETH | all three years | 3,285 | 85% | 22.78% | 7.6% |
Distribution of a single 8-hour BTC funding payment over the three years: 5th percentile −0.0034%, median 0.0061%, 95th percentile 0.0196%, 99th percentile 0.0468%. About a quarter of all periods sat exactly at the 0.01% default rate.
How to read it: the carry paid 12% to 13% in the 2024 bull year, 5% in 2025, and under 3% annualized so far in 2026 as leverage drained out of the market. The worst 30-day stretch in three years cost 0.33%. That is the drawdown profile every directional strategy on this board is competing with.
When it fails
- Negative funding regimes. In a crash, shorts crowd in and funding flips negative; the carry pays out instead of collecting. It has been brief in this sample, but 2022 had weeks of it.
- Margin on the short leg. A 30% rally in a week is normal for ETH. If the perp short is at 5x it gets liquidated and the spot leg is left naked long at the top.
- Fees and basis. Entering and exiting both legs costs four fees. At 2026 rates of 2% to 3% a year, a round trip can eat a quarter of the annual income.
- Counterparty. The spot and the short sit on the same exchange. If it fails, the hedge fails with it.
Use the numbers above as a yardstick. When you test a leverage method on RektChat and it shows 20% a year with a 40% drawdown, remember that a hedge with no directional view did 7.5% a year with a 0.3% worst month.