What is the impact of funding rate on cryptocurrency trading?

1 answers

• lipa766Sep 05, 2022 · 3 years ago
  The funding rate plays a significant role in cryptocurrency trading, and it is particularly relevant in perpetual swap contracts. The funding rate is designed to keep the perpetual swap price in line with the underlying asset price. When the funding rate is positive, it means that long positions are paying short positions, and this can lead to a higher cost of holding long positions. Conversely, when the funding rate is negative, short positions pay long positions, which can make holding short positions more expensive. Traders need to consider the funding rate when deciding whether to enter or exit positions, as it can impact the profitability of their trades. It's worth noting that different exchanges may have different funding rates, so it's essential to compare rates across platforms to find the most favorable trading conditions.
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