Funding Rate Arbitrage: What It Is and How It Works

Funding arbitrage in a nutshell.
On futures markets, payments (funding) go back and forth between longs and shorts every few hours. When funding is negative, shorts pay longs. Rates differ across exchanges. We open a long where funding is deeper in the negative and a short where it's shallower. The positions hedge each other, so price movement barely matters to us, and we profit from the difference in rates.

Breakdown using one coin right now

1. Look at the funding history (screenshot 1). For months the rate sat around 0.005% on every exchange. Today, Oct 9 at 11:00, the first sharp payment came in after the token pumped:
— Gate: -1.241%
— LBank: -0.705%
— Binance: -0.681%
— Bybit: -0.444%
— XT: -0.382%

The max spread between exchanges was 0.86% on a single payment. It's all visible in the table, both in the numbers and in the funding history. Any of our users can use this.

2. Now let's see what the scanner shows (screenshot 2):
— long on Bitget, funding -2% (we receive)
— short on Bybit, funding -0.5% (we pay)
— funding profit +1.5%, total profit including the price spread +1.14% (in our favor)
— only 1h 40m until the next payment on both exchanges

If rates hold, a second payment lands in about an hour and a half, again with a solid spread.

Why this happens.

A shitcoin pumps. The crowd shorts the "overheated" pump, and funding goes deep into the negative. The price keeps climbing, shorts get liquidated, and on top of that they pay massive funding. Meanwhile, the arbitrageur sits in a hedged position, doesn't care which way the price goes, and simply collects the payments.

You can catch setups like this with our scanner. All rates, timers and payment history are in one window with a convenient interface.

I've hidden the coin on purpose. To get the ticker and check it yourself, message our support: @arbitrage_scanner_support_bot

Also, everyone who reaches out before the end of today gets a little bonus from our team 🥳