What is crypto Funding Rate? | Funding Rate Crypto Arbitrage Strategy
Funding rate arbitrage
In this case I will show how I made arbitrage the funding rate using the futures + futures strategy.
From time to time, situations arise where exchanges give different funding rates for the same token. It is also possible that the funding rate for the same token on different exchanges occurs at different intervals, that is, on the exchange 1 funding rate is accrued once every 8 hours, and on the other exchange once every 4 hours. This is exactly how I managed to make money. This type of arbitrage allows you to earn even in the absence of a price spread.
I noticed that the funding rate calculation time for the BOND on the exchanges Gate and MEXC miscellaneous.
On the exchange MEXC accrual will be in 7 minutes.
And on the Gate accrual will be in 4 hours.
The funding rate was negative, which means that the longs receive accruals, and the shorts pay them.
Seeing the time difference, I decided to go long on MEXC and short on Gate, collect the funding rate on MEXC (as the long position holder) and then exit the trade without having to wait until I had to pay the funding rate on Gate (as short position holder).
I opened long on 750 coins at an average entry $1,281.
Short position opened on the Gate exchange for the same number of coins at almost the same entry price.
Then I closed the long and short positions in parts by placing orders.
Thanks to the competent placement of orders, it was also possible to make money on the price spread. Separately, I note that on the MEXC exchange the maker’s commission on futures 0%, which allowed to reduce commission costs.
Short position on the Gate exchange brought a loss 164,46$.
Long position on the MEXC exchange brought profitability of almost 191$.
Total income compiled:
191 - 164,46 = 26,54$
