Hello everyone! 👋 Recently, many of my friends have asked me about the funding rate arbitrage of cryptocurrency. Today I will talk about this topic with you. Then I'll also tell you about a strategy for profiting from funding rates.

First, you have to know what a funding rate is. Simply put, it is a small mechanism set up in perpetual contract trading to keep the contract price close to the spot price. When the contract price is higher than the spot price, long friends have to pay some fees to short sellers, and vice versa.

So, how to use this to make money? 🤑

1. Two-front battle: Assuming that the funding rate is positive, buy a certain amount of coins in the spot market and short the same amount in the perpetual contract market. In this way, no matter whether the market goes up or down, you will not lose money!

2. Reap the profit: If the funding rate in the contract market is positive, then you can receive this rate regularly for your short position in the contract market. The money just goes into your pocket steadily!

(What if the funding rate is negative? We need to borrow money to go short in the spot market and go long in the contract market. The cost of borrowing money may not be low, so you need to consider carefully when the funding rate is negative😊)

3. Call it a day: When you want to end this strategy, just sell the spot and contract positions at the same time.

but! Every strategy has its caveats, and this one is no exception:

Transaction fees: Don’t forget that the exchange will charge fees. Calculate this account carefully to see if it is really cost-effective.

The funding rate will change: This rate is not fixed, and you must always pay attention to its changes.

Liquidity: The market can be crazy at times, and you may find it difficult to buy or sell quickly. So, make sure the currency you trade has good liquidity.

There are always surprises: exchanges may have problems, and the network may be delayed. These are uncontrollable factors, so be prepared.

In short~(¯▽¯~)~, funding rate arbitrage is like a "little red envelope" in the market. If you use it wisely, you can make money more stably. But again, investment is risky and strategies need to be cautious! I hope my sharing can help you. If you have more questions, leave a message in the comment area and I will answer them one by one! 🚀🌟

Stay enthusiastic and keep exploring! 👋🎉