With the increasing interest in cryptocurrencies, more and more people are investing.
Especially after being re-elected, President Trump, who had been relatively silent before, started talking about Bitcoin and cryptocurrencies again.
The joke about 'cryptocurrencies are only used for campaigning and then abandoned' has gradually faded, so investors' attention is now focused on what strategy will be adopted in 2025.
However, the current market sentiment cannot be as completely positive as it was at the end of last year or the beginning of this year. Due to high volatility, each investor needs their own strategy to survive and continue investing.
This has led to a continuous increase in investment through global exchanges. Therefore, today I would like to introduce Binance (币安), the world's largest exchange, and discuss an important concept that must be understood: Funding Fee.
Binance is widely regarded as the world's number one exchange, with the largest trading volume and the most users in both spot and contract trading.
To understand the concept of funding rates on global exchanges, it is very appropriate to use Binance as an example, as it is the most representative platform.
Funding rate is a term used in futures trading.
As we all know, futures allow two-way trading: going long (bullish) and going short (bearish).
If the market believes that prices will fall, investors will short; if the market expects prices to rise, investors will go long. Since the flow of investors is different, the long-short ratio will naturally not be balanced.
If market sentiment is positive, long positions will increase. Conversely, if the market falls, short positions will increase.
To prevent this imbalance, the funding rate mechanism was created.
According to the official explanation, Binance's funding rate is a periodic payment between long and short traders, calculated based on the difference between the perpetual contract price and the spot price.
For example, if the funding rate is positive (+), it means there are more long positions than short positions. In this case, long positions need to pay funding fees to short positions.
Conversely, if the funding rate is negative (-), it means there are more short positions than long positions, then short positions need to pay funding fees to long positions.
Binance's funding rate is settled 3 times a day, China Standard Time CST: 08:00, 16:00, 00:00.
At these times, depending on your position (long or short), you may need to pay or receive funding fees. Of course, leverage also applies, so the results may be amplified due to market conditions.
Example (denominated in RMB)
Assuming an initial capital of ¥730 CNY (approximately $100 USD), using 30x leverage, the position value will become ¥21,900 CNY.
If the funding rate is set to 0.01%, you will need to pay approximately ¥2.2 CNY.
This is why market volatility often increases sharply at the funding rate settlement time.
This means that the funding rate and its ratio are directly affected by the market supply and demand balance. By understanding this, you can better grasp the market's direction and sentiment.
Of course, this concept is more beneficial for experienced investors. But even for beginners, understanding funding rates is still very important as it can be used in conjunction with other investment strategies.
By registering through the link below, you can get a 20% fee discount.
📍 Click here to receive a 20% discount on Binance fees
Even registered users can still enjoy a 20% fee discount if they meet the following 5 conditions.
The invitee already has a registered Binance account.
The invitee has never accepted an invitation.
The invitee's account has not made any transactions or used any products on the Binance platform in the past 180 days.
When the eligible invitee opens the link and logs in, a confirmation window will appear.
When the inviter clicks [Bind Now], the binding becomes effective.
Note: If you enter the wrong referral code or omit it, it cannot be modified. Be sure to use the link below to get this offer.
Binance's funding rate is an important concept to understand in today's highly volatile market conditions.
Hope this explanation has been helpful. I wish you successful investments, and we'll see you in the next article. Thank you.
