Futures Arbitrage with Negative Funding Rates

Case of SCRT with Negative Funding Rate

In this case, we will specifically demonstrate how to arbitrage a negative funding rate using the example of the SCRT token.

A significant difference in funding rates was observed between Bybit and XT exchanges.

How It Works (with a negative funding rate): on the exchange offering the higher funding rate, we take a long position, and on the other exchange, we take a short position.

The result is +1.2% - 0.3% = +0.9%.

We entered the trade with a total capital of over $100k.

Pay attention to the average entry price — the spread is 0.83%, which means we will also profit from the price convergence.

For clarity, I am attaching a screenshot showing the funding rate credited on Bybit:

It is important to highlight the order of opening long/short positions, specifically which position should be opened first. This should be determined based on the current market conditions, paying attention to the trend in the last few minutes—if you see the price rising, open the long position first, then the short. The screenshot below illustrates such a situation.

Arbitrage case with 5x leverage and negative funding rate

In this case, we will demonstrate funding rate arbitrage using the example of the API3 token.

On Bybit, the negative funding rate is -3%.

Meanwhile, on Phemex, the negative funding rate is -1.8%.

On Bybit, we opened a long position, and on Phemex, a short position, since short traders pay funding to long traders. This way, we receive 3% and lose 1.8%, resulting in a spread of +1.2%.

We took a slightly risky approach by entering the trade with 5x leverage. With this leverage, the funding rate also increases fivefold, resulting in a profit of +6%.

Remember that leverage significantly increases risk, so constant monitoring and setting stop-losses are essential.