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Funding

How to use futures funding in a trading strategy?Funding , also known as the funding rate, plays a crucial role in the dynamics of perpetual futures contracts. Its primary purpose is to maintain price parity between perpetual contracts and the underlying assets in the spot market. For instance, it ensures that the price of a BTCUSDT futures contract closely tracks the BTC spot price. Traders participate in funding by either paying or receiving the funding rate, which depends on the overall market conditions. In simpler terms, a trader can either incur the funding cost or earn from it. Some traders strategically use the funding mechanism to generate profits, not just from trading contracts but also from the funding rate itself. The necessity for funding arises to prevent significant disparities between perpetual futures contract prices and the actual assets. This mechanism helps smoothen price fluctuations in perpetual contracts, keeping them as close as possible to spot prices. It's important to note that funding is distinct from trading commissions, as funding rates are payments made by traders to other traders. On certain exchanges, funding comprises two components: a fixed percentage and a "premium" that adjusts based on the deviation between futures and spot prices. Typically, funding rates are calculated as a fraction of a percentage of the position size and depend on the magnitude of the deviations. Most exchanges settle funding payments every hour, four hours, or eight hours. Unlike trading commissions, which are charged for specific actions like opening or closing a position, funding rates accumulate continuously as long as the position remains open. Example When the funding rate is positive, it implies that long position holders pay short position holders. Conversely, when it's negative, short position holders pay long position holders. For example, if you hold a long perpetual contract at $5,000 and the funding rate is positive, you will pay a percentage of $5,000 (e.g., $0.76) to the trader holding a short position over a set period (e.g., 8 hours). Conversely, a negative funding rate suggests that the contract price has fallen below the spot price. To balance this, the exchange collects funding from short sellers and distributes it to long sellers. This encourages participants to avoid shorting and favor long positions, as the rate increases if the price continues to drop. In such situations, shorting becomes less profitable, prompting participants to close short positions, which, in turn, exerts upward pressure on the futures price to align with the spot price. The closer the futures price stays to the spot price, the lower the funding rates are. Thus, it's in the interest of traders to prevent deviations between contract and spot prices. The exchange continuously incentivizes traders to maintain this balance. In summary: Positive funding rate: Contract price > Spot price; long positions pay short positions. Negative funding rate: Contract price < Spot price; short positions pay long positions. The funding percentage accumulates as long as the position is open, and it can fluctuate between positive and negative based on market conditions. Each exchange may have its unique formula for calculating funding rates. For trading strategies, traders often compare funding rates with the prevailing market trend. The logic is simple: - Positive rate suggests the contract price is above the spot price, making short positions favorable. - Negative rate implies the contract price is below the spot price, making long positions attractive. If funding rates and the trend align, it can provide traders with an additional advantage. However, it's essential to regularly monitor funding rates to avoid unexpected losses when employing funding-based trading strategies. Hope you enjoyed the content I created, You can support with your likes and comments this idea so more people can watch! ✅Disclaimer: Please be aware of the risks involved in trading. This idea was made for educational purposes only not for financial Investment Purposes. --- • Look at my ideas about interesting altcoins in the related section down below ↓ • For more ideas please hit "Like" and "Follow"!
BITSTAMP:BTCUSDEducation
by Crypto4light
Ripple Commits $100M to Invest in Carbon MarketsBlockchain company Ripple has allocated $100 million to accelerate carbon removal activity and aid in modernizing such markets with the help of investments in innovative carbon removal firms and sustainable financial tech platforms. According to the official press release, Ripple also plans to create a “portfolio of additive, long-term, nature and science-based carbon credits, back innovative carbon-removal technology companies and market makers.” Some of these will be utilized to meet its own commitment to accomplish net-zero in less than a decade. The funding will also focus on supporting new functionality and developer tools that allow carbon credit tokenization as core NFTs on the public blockchain – XRP Ledger (XRPL).
BINANCE:XRPUSD
by johanpedersen
Block Tackle Raises $5M Block Tackle is a new Web3 gaming startup that has raised $5 million in seed funding. The studio is working on SkateX, a Solana-based video game with NFT skateboards. Veteran video game developers are pouring into the blockchain space, if recent studio funding announcements are any indication, and here’s another to add to the list. Today, startup Block Tackle announced that it has raised $5 million to develop a Solana-based skateboarding game called SkateX with a team of experienced developers. The $5 million seed round was led by Play Ventures and Cadenza Ventures. An array of other notable investors also participated, such as Coinbase Ventures, Solana Ventures, leading metaverse investor Animoca Brands, and Twitch co-founder Kevin Lin.
BINANCE:SOLUSDLong
by pugrathisa
Maximum pain has already been inflicted. Time for BTC to go up.How much more pain can we inflict? All the liquidity has been taken from Short Term Holders, there's no sell pressure. Market's had a full healthy reset, while maintaining a bullish structure on the large time frames. The comparison I've made with May-Oct 2020 is not so much due to PA similarities, but more because I believe both now and then we have a price consolidation before another leg up. We also find similarities with the Bitmex Funding / Premium Index as well as market exhaustion and overall sentiment. I am very bullish with the current market development and I've been this way for a while now - you can check my previous ideas. I anticipated the dip to 33,000$ as well, which I see as a maximum pain event that didn't change the bullish market structure. Of course, until we score new ATHs, we would never know. Cheers!
BITSTAMP:BTCUSDLong
by FiveMillionMax
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