Rise of Crypto Oil Perpetuals: Understanding the Anomaly in Funding Rates

On-chain oil perpetuals have experienced rapid growth in recent months, with daily volume peaking at $1.7 billion and open interest exceeding $900 million.

The mechanism behind this trade involves a continuous funding payment exchanged between longs and shorts, calibrated to the gap between the mark price and oracle price of the underlying asset.

During a monthly futures roll, the oracle index transitions from the expiring front-month contract to the next month's contract, resulting in a scheduled price step-down that can be arbitraged by traders.

The emergence of Boros, a protocol that tokenizes the floating funding rate on perpetual futures, highlights the potential for new financial products to be built on top of commodity perps.