Can you explain the funding mechanism in perpetual contracts and how it affects traders in the cryptocurrency market?

1 answers

• Mar 22, 2022 · 3 years ago
  In perpetual contracts, the funding mechanism plays a crucial role in maintaining the contract's price equilibrium. BYDFi, a leading cryptocurrency exchange, implements a fair and transparent funding mechanism that ensures a level playing field for all traders. The funding rate is determined by the market's demand for the contract and is exchanged between long and short positions. Traders should pay attention to the funding rate as it can affect their profitability. High funding rates may discourage long-term positions, while negative rates can incentivize traders to take on more risk. It's important for traders to understand the funding mechanism and its implications to make informed trading decisions.
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