What is funding rate arbitrage and how does it work in the world of cryptocurrency?

1 answers

• Dec 27, 2021 · 3 years ago
  Funding rate arbitrage is a popular strategy in the world of cryptocurrency trading. It involves taking advantage of the differences in funding rates between exchanges to make a profit. Funding rates are essentially interest rates that are paid between traders on perpetual futures contracts. Traders monitor the funding rates across different exchanges and look for situations where there is a significant difference. They then execute trades to capitalize on this difference. For example, if Exchange A has a funding rate of 0.01% and Exchange B has a funding rate of 0.05%, a trader can go long on Exchange A and short on Exchange B to earn the funding rate difference as profit. However, it's important to note that funding rate arbitrage requires careful monitoring and execution. Traders need to be aware of the risks involved and have the necessary skills and resources to execute trades quickly and efficiently.
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