Yes. Funding payments are deducted from position margin, and this can lead to liquidation. However, the Mark Price calculation already incorporates the funding fee requirement, meaning a position is most likely liquidated due to unrealised losses before the funding payment is actually processed.
How Do Funding Payments Reduce Position Margin Toward Liquidation?
Funding payments occur at regular intervals (typically every eight hours on BitMEX). Each payment is calculated on the full notional value of your position, not just your margin. On a large position with high leverage, even a modest funding rate can remove a significant portion of the remaining margin.
However, there is a critical nuance. The Mark Price calculation already incorporates the upcoming funding fee requirement. This means that in most cases, the position will be liquidated due to unrealised losses before the funding timestamp arrives. The funding fee is effectively priced into the Mark Price, so the liquidation typically happens in advance of the actual payment.
The practical implication: funding fees can and do contribute to liquidation, but they rarely act as the sole trigger in isolation. They combine with adverse price movement to erode position margin.
How can I avoid funding-related liquidation?
Three measures reduce the risk of funding fees contributing to liquidation:
- Check the funding rate before entering a position. A high funding rate (above 0.1% per interval) means holding costs are elevated. Consider waiting for the rate to normalise or reducing leverage.
- Close positions before funding timestamps. If you are day trading and do not intend to hold through funding, exit before the payment is processed to avoid the deduction.
- Use lower leverage. Higher leverage leaves less margin buffer. Lower leverage increases the distance between your equity and the maintenance margin threshold, absorbing funding costs without approaching liquidation.
Monitor the funding rate and the funding countdown timer displayed on the BitMEX trading interface. Funding costs are unavoidable on perpetual swaps, but their impact on liquidation risk is manageable with proper position sizing.