Borrow fee

A charge that accrues continuously while a leveraged position is open, paid to the liquidity providers whose capital backs it. It is separate from the one-off trading fees paid at entry and exit.

Definition

A borrow fee is rent on the exposure you are holding. On pool-based perpetual protocols, a leveraged position draws on liquidity that someone deposited, and the fee compensates them for the time that liquidity is committed to you rather than available to anyone else.

How it differs from funding

Both are recurring costs of holding a position, but they flow to different places for different reasons.

Funding moves value between longs and shorts to keep the contract price near spot, and can be positive or negative for you depending on which side is crowded. A borrow fee is paid by the position holder to the liquidity providers, and it is always a cost. Holding either direction incurs it.

What makes it more or less expensive

The rate typically tracks utilization: the more of a pool’s capacity is committed to open positions, the higher the rate climbs. That is the pool defending itself, making it expensive to be the marginal position when there is little room left.

The consequence is that the cost of a position is not knowable in advance. Open a position in a quiet market, and the fee can rise later because other traders crowded into the same side.

Why it decides outcomes

Because it accrues against your collateral, a borrow fee pulls the liquidation price closer for as long as the position is open. A trade that is directionally right but held too long can still end in a loss, and a position left open through a long flat stretch can be liquidated on cost alone.

That makes borrow fees the main argument against treating a leveraged position as a long-term holding.

Where you will run into it

On pool-based perpetual venues such as GMX, shown as an accrued amount on the position and as a rate on the market. Order-book venues generally use funding instead, so which cost applies depends on the protocol design rather than the trade.