How to calculate DigiFinex contract rates

To determine the DigiFinex contract rate, users require data on the spot price of the asset, funding rate, and basis, combining them into a formulaic calculation.

Nov 30, 2024 at 02:09 am

How to Calculate DigiFinex Contract Rates

DigiFinex is a cryptocurrency exchange that offers a variety of financial products, including perpetual contracts. Perpetual contracts are a type of derivative that allows traders to speculate on the future price of an underlying asset, such as Bitcoin or Ethereum.

The price of a perpetual contract is determined by a number of factors, including the spot price of the underlying asset, the funding rate, and the basis.

Spot Price

The spot price of an underlying asset is the current market price of that asset. For example, if the spot price of Bitcoin is $10,000, then a perpetual contract for Bitcoin would also be priced at $10,000.

Funding Rate

The funding rate is a fee that is paid by traders who are long (i.e., betting that the price of the underlying asset will go up) to traders who are short (i.e., betting that the price of the underlying asset will go down). The funding rate is designed to encourage traders to keep the price of the perpetual contract close to the spot price of the underlying asset.

The funding rate is typically calculated every 8 hours. The amount of the funding fee is determined by the difference between the perpetual contract price and the spot price of the underlying asset. If the perpetual contract price is higher than the spot price, then traders who are long will pay a funding fee to traders who are short. Conversely, if the perpetual contract price is lower than the spot price, then traders who are short will pay a funding fee to traders who are long.

Basis

The basis is the difference between the perpetual contract price and the spot price of the underlying asset. The basis can be positive or negative. If the basis is positive, then the perpetual contract price is higher than the spot price. Conversely, if the basis is negative, then the perpetual contract price is lower than the spot price.

The basis can be affected by a number of factors, including the supply and demand for perpetual contracts, the volatility of the underlying asset, and the expectations of traders.

How to Calculate DigiFinex Contract Rates

To calculate the DigiFinex contract rates, you will need to know the following information:

• The spot price of the underlying asset
• The funding rate
• The basis

Once you have this information, you can use the following formula to calculate the DigiFinex contract rate:

Perpetual contract price = Spot price + (Funding rate * Time to expiration) + Basis

For example, if the spot price of Bitcoin is $10,000, the funding rate is 0.01%, and the basis is 0.1%, then the perpetual contract price would be $10,010.01.

Conclusion

Perpetual contracts are a complex financial product that can be difficult to understand. However, by understanding the factors that affect the price of perpetual contracts, you can make more informed trading decisions.