BTSE's Funding Rate

Updated: Oct 25, 2019

Back to Part 7

The funding rate is an ever-changing aspect of futures trading, seen on many exchanges in the crypto space. It ensures that futures trading product prices are close to their correlated spot market prices. The funding rate can be found on the right-hand side of the BTSE exchange interface, below the price chart.

The funding rate, applicable to futures trading products on BTSE, is a method to ensure the futures price of an asset does not drift far from its spot price. Futures trading products are derivatives of underlying assets. At times, prices for these trading products may gravitate away from their underlying assets’ spot prices. To solve this, every eight hours, the funding rate takes (or pays, depending) a percentage of your open positions, based on the products you are trading and the underlying assets involved.

For example, let’s say Bitcoin Perpetual Futures Contracts (BPFC) are trading at $9,000 per 1,000 BPFC (1 bitcoin), and Bitcoin spot is trading at $8,400 per Bitcoin on the BTSE exchange. In this instance, BTSE sets a positive funding rate that pays traders a small percentage to short BPFC, thus hopefully bringing the price of Bitcoin futures back down to bitcoin’s spot price. This funding rate, however, only applies to traders holding open positions at the time of funding. Funding occurs every eight hours, with a countdown shown next to the percentage payout / fee.

In this example, if you hold an open BPFC short position at the time of funding, you will be paid the funding rate, which is added to your open position. This payment occurs automatically.

You do not need to do anything specific to pay or receive the rate, except hold an open position at the time of funding.


The percentage shown is the percentage of your open position that you will be paid for that specific trading product at the time of funding. Using the above example, if BTSE has a positive funding rate of 0.5% and you hold an open short position of 1,000 BPFC (1 Bitcoin) valued at $9,000, you receive the equivalent of $45 added to your open short position at the time of funding. This value is paid out to you in BPFC and added to your open position.

This scenario is reversed if Bitcoin Perpetual Futures are trading at a price lower than Bitcoin’s spot price on the BTSE exchange. In this case, short positions pay the funding rate to long positions at the time of funding.


Quick View

If the funding rate is positive, and you hold a short position, you will be paid the funding rate, relative to the size of your open position at the time of funding. If the funding rate is negative, and you hold a long position, you will be paid the funding rate, relative to the size of your open position at the time of funding.


Continue to Part 9

Categories

Company

Community

© 2019-2020 BTSE.com All rights reserved