Perpetual contract funding rate refers to the periodic fee paid to long or short traders based on the price difference between the perpetual contract market price and the spot price. The main purpose is to allow the perpetual contract trading price to anchor the spot index price. The following are its relevant points:
🔶Calculation and collection frequency:
The calculation and collection time of funding rates vary from trading platform to trading platform, but most platforms settle every 8 hours, for example, at 00:00 (UTC+8), 08:00 (UTC+8) and 16:00 (UTC+8). Some platforms may have other settlement cycle settings.
🔶The positive and negative impact of rates:
🔸When the perpetual contract market price is higher than the spot price, the funding rate is positive. At this time, long traders need to pay funding fees to short traders, which means that most people in the market expect prices to rise.
🔸When the perpetual contract market price is lower than the spot price, the funding rate is negative, and short traders need to pay funding fees to long traders, which means that most people in the market expect prices to fall.
🔶Function and significance:
🔸The funding rate mechanism can balance the power of both long and short parties and prevent the perpetual contract price from deviating too much from the spot price. If there is no funding rate, when the market continues to be unilateral, the gap between the contract price and the spot price may continue to widen, leading to market imbalance.
🔸For traders, funding rates affect transaction costs and profits. Traders need to consider funding rates when opening positions in order to better assess the risks and benefits of trading.
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The above content only represents personal opinions and does not constitute any investment advice!
