Contract

Text

What is the funding fee for a perpetual contract

The funding fee is a payment exchanged between perpetual contract parties, based on interest rates, price discrepancies, and funding intervals, ensuring price alignment with the underlying asset's spot price.

Oct 24, 2024 at 07:33 am

What is the funding fee for a perpetual contract?

A funding fee is a payment made between two parties in a perpetual contract. The party who has a positive position (i.e., they are long) pays the party who has a negative position (i.e., they are short). The purpose of the funding fee is to keep the price of the perpetual contract in line with the spot price of the underlying asset.

The funding fee is calculated based on the following formula:

Funding fee = (Interest rate * (Index price - Mark price)) / Funding interval

where:

Interest rate is the annualized interest rate on the underlying asset
Index price is the current price of the underlying asset
Mark price is the current price of the perpetual contract
Funding interval is the time between each funding payment

The funding fee is typically paid every 8 hours. The size of the funding fee can vary depending on the interest rate, the difference between the index price and the mark price, and the funding interval.

How does the funding fee work?

The funding fee is paid by the party who has a positive position to the party who has a negative position. This is because the party who is long is borrowing the underlying asset from the party who is short. The funding fee is used to compensate the party who is short for the risk of lending the underlying asset.

The size of the funding fee is determined by the following factors:

Interest rate: The interest rate is the annualized interest rate on the underlying asset. The higher the interest rate, the higher the funding fee. This is because the party who is long is borrowing more money from the party who is short.
Difference between the index price and the mark price: The difference between the index price and the mark price is the difference between the current price of the underlying asset and the current price of the perpetual contract. The larger the difference, the higher the funding fee. This is because the party who is long is taking on more risk by being long the underlying asset.
Funding interval: The funding interval is the time between each funding payment. The shorter the funding interval, the higher the funding fee. This is because the party who is long is borrowing the underlying asset for a shorter period of time.

Conclusion

The funding fee is an important part of the perpetual contract market. It helps to keep the price of the perpetual contract in line with the spot price of the underlying asset. The size of the funding fee is determined by a number of factors, including the interest rate, the difference between the index price and the mark price, and the funding interval.

Disclaimer:info@kdj.com

The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research！

If you believe that the content used on this website infringes your copyright, please contact us immediately (info@kdj.com) and we will delete it promptly.

Fear & Greed Index

Trade Now

Biggest Gainers

LUNA

$0.0848

57.19%

Trade Now
DEGEN

$0.0251

42.80%

Trade Now
SHOGGOTH

$0.1329

40.43%

Trade Now
BULL

$0.0815

36.74%

Trade Now
SKBDI

$1.02

36.15%

Trade Now
CAT

$0.0...04904

30.14%

Trade Now

Latest Crypto News

WallitIQ (WLTQ): Investors Positioning For A 34,000% ROI As Dogecoin And Shiba Inu Prices Compete For Dominance
2024-11-15 10:15:01
Fetch.ai (FET) Lags Behind Other AI Coins, Raising Concerns About Its Ability to Maintain Its Position
2024-11-15 10:15:01
Qubetics Redefines Cross-Border Payments with Blockchain, Targeting $707,000 Investment Potential While Algorand and Cosmos Ecosystem Lead November 2024
2024-11-15 10:15:01
Bitcoin Eyes $100,000 as It Continues Its Bullish Uptrend, Inspired by the Notorious Internet Meme, Pepe Outshines Everyone
2024-11-15 10:15:01
Dogecoin Soars After President-Elect Donald Trump Announces the Creation of the Department of Government Efficiency (DOGE)
2024-11-15 08:15:02
PEPE the Meme Coin with a Frog Mascot Took the Crypto World by Storm
2024-11-15 10:15:01

Related knowledge

How to calculate Upbit contract rate

Nov 15,2024 at 04:47am

A Comprehensive Guide to Calculating Upbit Contract RatesUpbit, a leading South Korean cryptocurrency exchange, offers a comprehensive suite of trading options, including cryptocurrency spot trading, margin trading, and futures contracts trading. Futures contracts are financial instruments that allow traders to speculate on the future price of an asset,...

How long does it take for Upbit contract settlement

Nov 14,2024 at 10:10pm

How Long Does It Take for Upbit Contract Settlement?Upbit, a renowned South Korean cryptocurrency exchange, offers a diverse range of trading options, including spot trading and contract trading. Contract trading, also known as futures trading, allows traders to speculate on the future price movements of underlying assets without taking physical possess...

What is Upbit contract trading

Nov 14,2024 at 10:46pm

What is Upbit Contract Trading?Upbit is a South Korean cryptocurrency exchange that offers a wide range of trading options, including spot trading, margin trading, and contract trading. Contract trading, also known as futures trading, allows traders to speculate on the future price of a cryptocurrency without having to actually own the underlying asset....

What does Upbit contract trading mean

Nov 14,2024 at 10:22pm

What Does Upbit Contract Trading Mean?IntroductionUpbit, a leading South Korean cryptocurrency exchange, offers a range of trading options, including contract trading. Contract trading is a derivative instrument that allows traders to speculate on the price movements of underlying assets without owning them directly. This can provide opportunities for b...

How to read Upbit contract K-line

Nov 14,2024 at 02:44pm

How to Read Upbit Contract K-lineUpbit is a popular South Korean cryptocurrency exchange that offers a variety of trading options, including spot trading, margin trading, and contract trading. Contract trading is a type of futures trading that allows traders to speculate on the future price of a cryptocurrency without actually owning the underlying asse...

Tutorial on Upbit currency-based contracts

Nov 14,2024 at 06:30pm

Tutorial on Upbit Currency-Based ContractsUpbit is a well-known cryptocurrency exchange in South Korea that offers a variety of trading options, including currency-based contracts. These contracts are a type of derivative that allows traders to speculate on the price of an underlying asset, such as Bitcoin or Ethereum, without having to own the asset it...