Annualised funding
How is an eight-hour funding rate turned into a yearly figure, and why compare it with other costs?
In plain words
Annualised funding restates a payment made every few hours as a yearly percentage, by imagining the same rate repeated over all the payment periods in a year. This converts a tiny per-period number into a figure that can be set beside interest rates, staking yields or expected yearly returns.
Why it matters
Funding is a running cost of holding a perpetual position. Annualising it puts that cost next to other uses of the same capital, so a holder can see whether staying in the position is expensive relative to alternatives, rather than reading a small per-period rate in isolation.
In a real week: ETH, week of 1 February 2021
In the week of 1 February 2021, ETH's funding averaged 0.1182% per eight hours, with a maximum of 0.1764% and a minimum of 0.025%. Annualising this average requires assuming that the same rate held for every payment period in the year. The same week closed 22.79% higher, with realised volatility of 106.4% a year and a weekly range of 38.62%.
A common mistake
Treating the annualised figure as a guaranteed cost. It assumes the current per-period rate persists unchanged for a year; actual funding resets frequently and can fall to near zero or turn negative.