How Do Perpetual Swaps Manage Basis Risk without an Expiration Date?

Perpetual swaps manage basis risk through the Funding Rate mechanism. The Funding Rate is a small, periodic payment exchanged between the long and short sides to ensure the perpetual contract's price (the Mark Price) remains closely tethered to the underlying Index Price.

If the perpetual trades above the index, longs pay shorts (positive funding), incentivizing short positions and pushing the price down, thus controlling the basis.