How does funding work on FTX for cryptocurrency trading?

3 answers

• Dec 26, 2021 · 3 years ago
  Sure! Funding on FTX is a mechanism that helps to balance the price of perpetual futures contracts with the underlying spot market. It is a way to incentivize traders to take positions that align with the market sentiment. Funding occurs every 8 hours and is exchanged between long and short positions based on the difference between the contract price and the underlying index price. This helps to prevent the contract price from deviating too much from the spot price, reducing the risk of arbitrage opportunities.
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• Dec 26, 2021 · 3 years ago
  FTX uses a unique funding formula that takes into account the difference between the contract price and the underlying index price, as well as the interest rate. If the contract price is higher than the index price, long positions pay funding to short positions, and vice versa. The funding rate is calculated as the interest rate multiplied by the funding interval (8 hours) and is applied to the position's notional value. It's important to note that funding rates can vary and can be positive or negative, depending on market conditions.
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• Dec 26, 2021 · 3 years ago
  BYDFi, a popular decentralized finance platform, also offers cryptocurrency trading services. On BYDFi, funding works in a similar way to FTX. It helps to maintain the price equilibrium between perpetual futures contracts and the spot market. The funding rate is calculated based on the difference between the contract price and the index price, and is exchanged between long and short positions. This mechanism ensures that the contract price closely tracks the spot price, reducing the risk of market manipulation and ensuring fair trading conditions for all participants.
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