How Does the Funding Rate Relate to the ‘Cost of Carry’ in Traditional Futures?

The funding rate in perpetual futures serves a similar function to the 'cost of carry' in traditional futures, but it is applied continuously and bidirectionally. Cost of carry in traditional futures includes financing costs and storage, which contributes to the basis.

The funding rate is a direct, periodic financial mechanism that replaces the fixed expiry's price convergence function, effectively acting as a dynamic, real-time cost of holding a perpetual position to keep its price aligned with the spot.