Difference between revisions of "Funding rate"
From CryptoWiki
(Created page with "* [https://medium.com/poloniex/what-is-a-funding-rate-257e4cbeefe0 From] Poloniex (19-11-2022): ''"Funding rates are periodic amounts of an asset paid between short and long traders that hold perpetual contracts positions. The reason for funding rates is that perpetual futures contracts, as their name suggests, can be held indefinitely without expiry. And as traders go long or short, contract prices diverge from the index price of the underl...") |
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Latest revision as of 07:43, 21 November 2022
"Funding rates are periodic amounts of an asset paid between short and long traders that hold perpetual contracts positions. The reason for funding rates is that perpetual futures contracts, as their name suggests, can be held indefinitely without expiry. And as traders go long or short, contract prices diverge from the index price of the underlying crypto asset. So, to enforce convergence with said index price, exchanges use funding rates where shorts pay longs on a negative funding rate and longs pay shorts on a positive funding rate. In a bullish market, the funding rate will be positive and trend upward, whereas in a bearish market, the opposite happens."
