Crypto funding rates are calculated using two components: the market's interest rate and the difference between perpetual contract prices and the spot price of the cryptocurrency. Interest Rate: This part reflects general borrowing costs in the financial market.
What are Futures funding rates in cryptocurrency trading?
Futures funding rates in cryptocurrency trading are mechanisms used by exchanges to align the prices of perpetual contracts with the underlying asset's spot price.
How do crypto-derivatives exchanges work?
Most crypto-derivatives exchanges employ a Funding Rate mechanism to keep contract prices in line with the index at all times. These rates vary as asset prices turn bullish or bearish and are determined by market forces. Additionally, crypto Funding Rates also differ across exchanges – on some exchanges, these rates remain persistently high.
