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Your Perp Can Get Liquidated Without the Price Moving
Most people think of liquidation as a price event β the market drops, you get closed. But there's a second, quieter way to get liquidated on a perpetual future: funding fees eating your margin while the price does nothing at all.
Funding is charged on your notional, not your margin
This is the part that catches people out. Funding β the payment that keeps a perp tethered to spot β is calculated on your full position size (notional), but it's deducted from your margin. With 10x leverage those are very different numbers: $100 of margin controls a $1,000 position, and funding is charged on the $1,000.
So even if price sits perfectly still, every funding interval quietly shaves a slice off your margin. Do that long enough and your margin drops to the maintenance level β and you're liquidated, no price move required.
How fast? The actual math
Take a $1,000 position at 10x ($100 margin). Maintenance margin is ~0.5% ($5), so you have roughly $95 of buffer before liquidation. Funding at rate r per 8h costs notional Γ r Γ 3 per day. Divide the buffer by the daily funding and you get the number of days to bleed out β with price flat:
| Funding rate | Annualised | Cost/day ($1k pos) | Days to liquidation* |
|---|---|---|---|
| 0.01% / 8h (calm) | ~11% / yr | $0.30 | ~317 days |
| 0.03% / 8h | ~33% / yr | $0.90 | ~106 days |
| 0.05% / 8h (busy) | ~55% / yr | $1.50 | ~63 days |
| 0.10% / 8h (hot) | ~110% / yr | $3.00 | ~32 days |
| 0.20% / 8h (mania) | ~219% / yr | $6.00 | ~16 days |
*Price held flat, 10x, ~0.5% maintenance. Real exchanges compound and mark differently β treat these as the order of magnitude.
Look at the annualised column. At 0.10%/8h β a rate you'll see on hot altcoins for days at a time β funding runs about 110% a year. You would pay more than your entire notional in funding over a year. That's not a rounding error; that's the whole trade.
Leverage makes it worse β fast
Higher leverage means less margin backing the same notional, so the same funding drains it quicker. Same $1,000 position, same 0.10%/8h ($3/day):
| Leverage | Margin | Buffer | Days to liquidation* |
|---|---|---|---|
| 5x | $200 | $195 | ~65 days |
| 10x | $100 | $95 | ~32 days |
| 20x | $50 | $45 | ~15 days |
| 50x | $20 | $15 | ~5 days |
At 50x, hot funding alone can liquidate a flat position inside a week. This is a big part of why high-leverage "hold and pray" positions on trending alts get closed even when the trader was directionally right β the funding bled them out before the move played out.
What to actually do about it
- Check funding before you hold. A scalp doesn't care about funding; a multi-day position lives or dies by it. See current rates on the live funding page.
- Put funding into your break-even. Your true break-even is entry + fees + funding-while-held β not just entry. On the crowded side, that gap grows every 8 hours.
- Run the countdown. The time-to-liquidation calculator takes your leverage, margin and funding rate and tells you how many days you have with price flat. The funding calculator gives the running cost.
- Consider the other side. When funding is very positive, longs pay shorts β so a short (or a hedge) actually earns funding. The crowded side always pays.
The takeaway
Liquidation isn't only a price line β on a leveraged perp it's also a clock. Funding is charged on your notional, drains your margin, and at hot rates it can close a flat position in weeks or even days. Before you hold a leveraged perp overnight, check the funding rate and run the countdown β the price isn't the only thing that can get you rekt.
New to any of this? Start with Funding Rates Explained and the free trading academy, then size your position with the position-size calculator.
Educational only β not financial advice. Figures are simplified first-order estimates (no compounding, exchange formulas vary). Leverage can lose your entire deposit.