1. Funding Rate
In traditional futures contracts, there is often a price discrepancy between futures prices and spot prices, known as the basis. As a futures contract approaches expiration, this basis generally trends toward zero. However, since perpetual contracts do not have an expiration date, a funding fee mechanism is used to ensure that the perpetual contract price remains in line with the spot price.
When the funding rate is positive, longs pay shorts.
When the funding rate is negative, shorts pay longs.
2. Funding Fees
Funding Fee Collection Schedule
Funding fees are charged every 8 hours at the following times:
08:00, 16:00, and 24:00 (GMT+8)
Users only pay or receive funding fees if they hold a position at these times.
If a position is closed before the fee is charged, no funding fee is applied.
Funding Fee Calculation
Funding Fee=Position Value×Funding Rate\text{Funding Fee} = \text{Position Value} \times \text{Funding Rate}Funding Fee=Position Value×Funding RatePosition Value=Contract Quantity×Contract Multiplier×Latest Mark Price\text{Position Value} = \text{Contract Quantity} \times \text{Contract Multiplier} \times \text{Latest Mark Price}Position Value=Contract Quantity×Contract Multiplier×Latest Mark Price
Position value is independent of leverage.
When the funding rate is positive, longs pay shorts.
When the funding rate is negative, shorts pay longs.
Example:
A trader holds 100 BTC perpetual contracts, where each contract has a multiplier of 0.001 BTC.
The current mark price of BTC is 8,000 USDT.
The funding rate is 0.01%.
The trader’s funding fee is calculated as:
0.001×100×8000×0.01%=0.08 USDT0.001 \times 100 \times 8000 \times 0.01\% = 0.08 \text{ USDT}0.001×100×8000×0.01%=0.08 USDT
3. How the Funding Rate is Determined
The funding rate consists of two components:
Interest Rate (I)
Premium/Discount (P)
This mechanism ensures that the perpetual contract price closely follows the spot market price. It works similarly to margin trading, where buyers and sellers periodically exchange funding fees.
1. Interest Rate Component
The interest rate (I) is determined by the borrowing rates of the base currency and quote currency.
Formula:
I=Quote Currency Rate−Base Currency RateFunding IntervalI = \frac{\text{Quote Currency Rate} - \text{Base Currency Rate}}{\text{Funding Interval}}I=Funding IntervalQuote Currency Rate−Base Currency Rate
For USDT perpetual contracts, a fixed interest rate is used, which is currently set to 0.00% per day, but it may be adjusted based on market factors such as the federal funds rate.
2. Premium/Discount Component
Sometimes, the price of a perpetual contract deviates significantly from the mark price, leading to a premium or discount.
The premium index (P) is used to adjust the next funding rate to align the perpetual contract price with the market.
Formula:
P=max(0,Weighted Buy Price−Mark Price)−max(0,Mark Price−Weighted Sell Price)Spot Price+Mark Price Fair BasisP = \frac{\max(0, \text{Weighted Buy Price} - \text{Mark Price}) - \max(0, \text{Mark Price} - \text{Weighted Sell Price})}{\text{Spot Price}} + \text{Mark Price Fair Basis}P=Spot Pricemax(0,Weighted Buy Price−Mark Price)−max(0,Mark Price−Weighted Sell Price)+Mark Price Fair Basis
3. Weighted Buy/Sell Price Calculation
Weighted Buy Price:
The average buy order price for N contracts in the order book, starting from the best bid.
Weighted Sell Price:
The average sell order price for N contracts in the order book, starting from the best ask.
N Contract Values:
BTC Perpetual Contracts: N = 80 contracts
Other Cryptocurrency Contracts: N = 800 contracts
4. Final Funding Rate Calculation
Bityi calculates the premium index every minute and then takes a time-weighted average over 8 hours.
The final funding rate is calculated as:
F=P+clamp(I−P,0.05%,−0.05%)F = P + \text{clamp} (I - P, 0.05\%, -0.05\%)F=P+clamp(I−P,0.05%,−0.05%)
If (I - P) falls within ±0.05%, then F = P + (I - P) = I.
In other words, if the premium index is between -0.04% and 0.06%, the funding rate will equal 0.01% (the interest rate).
4. Funding Rate Limits
To ensure high leverage trading remains available, Bityi imposes funding rate caps, including two main limits:
Absolute Funding Rate Cap
Funding Rate Cap=(Initial Margin Rate−Maintenance Margin Rate)×75%\text{Funding Rate Cap} = (\text{Initial Margin Rate} - \text{Maintenance Margin Rate}) \times 75\%Funding Rate Cap=(Initial Margin Rate−Maintenance Margin Rate)×75%
Example:
Initial Margin Rate = 1%
Maintenance Margin Rate = 0.5%
Maximum Funding Rate = 75% × (1% - 0.5%) = 0.375%
The funding rate cannot change by more than 75% of the maintenance margin within an 8-hour funding interval.