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Playing with altcoin contracts now, the most ruthless knife is not the drastic rise and fall, but the funding rate that many people don’t understand. This thing was originally used to balance both long and short positions, but now it has become a weapon for high-control market makers to precisely harvest retail investors. In simple terms, the funding rate is the "balance fee" that both long and short sides pay each other in perpetual contracts to prevent the contract price from straying too far from the spot price. Normally, this fee is calculated every 8 hours and the rate is very low. But now for many altcoins, market makers can shorten the settlement period to 1 hour, and the rate can deduct 2% from you in just one hour! Just think, if they deduct dozens of points from you in a day, even if the price doesn’t move, you would still end up losing everything.

Why is this happening?
Because now over seventy percent of altcoins are high-control coins. To put it simply, the trading volume is extremely low, and the operator can easily manipulate the K-line with a small amount of money. Most coins are concentrated in the hands of a few addresses. The project itself lacks any real substance and relies entirely on storytelling. The operator's harvesting strategy is a set of combination punches: accumulating at low positions, releasing news to generate momentum, and using low fees to attract retail investors. Suddenly, a violent price surge occurs, attracting everyone to frantically follow the trend and go long. As the number of participants increases, the contract price rises significantly above the spot price, and the funding rate skyrockets to 1% or 2% per hour. It remains stagnant at a high level, starting to drain funds. The price neither rises nor falls, but the high funding rates continuously deduct money from retail investors going long, until their margin is exhausted, after which the operator crashes the price to harvest.

What's even more outrageous is that the market makers can also arbitrage between different exchanges. For example, they create a false impression in exchanges with high fees to attract retail investors while simultaneously taking reverse actions in exchanges with stable fees, making profits from both sides.

In summary:
In the shanzhai contract market, the funding rate has shifted from a balancing tool to a major source of risk. In the face of highly controlled and high fee cryptocurrencies, the best strategy is to stay away.