Gate.io Blog, The latest official news
Q:Today let's study a new rate of Perpetual Contract - Funding Rate.
A: Here you go.
Q: What is Funding Rate?
1.The Funding Fee is a periodic payment made to either long or short position traders, calculated based on the difference between the perpetual contract prices and spot prices.
2.When the market is bullish, the Funding Rate is positive and tends to rise over time.
3.Traders who have long positions will pay a Funding Fee to traders who have short positions.
4.When the market is bearish, the funding rate is negative, and traders who hold short positions must pay a funding fee to the long position traders.
5.Funding Fees are mainly used to encourage the perpetual contract and the underlying asset's prices to align.
6.Underlying assets are the financial assets upon which a derivative's price is based.
7.Perpetual contracts, unlike traditional futures, have no expiration date, and traders can hold positions indefinitely unless liquidated. As a result, crypto exchanges developed a system to ensure that perpetual contract prices match the index. This is referred to as the Funding Rate.
8.Futures contracts can be traded at a price that is different from the Mark Price.
9.The Interest Rate and Premium Index are calculated every minute and stored in a time series.
10.Premium Index, it shows you for each coin whether the spot market is trading higher than the perpetual or not.
Q: How to calculate it in Gate.io?
1.The calculation of the fund rate mainly considers the interest difference between the Denominated Currency and Settlement Currency, as well as the basis difference between the intraday transaction price and the external spot price.
2.Formula is as following:
1).Funding rate = premium index + clamp (0.01%-premium index, 0.05%, -0.05%) (where 0.01% is the interest rate difference)
2).For more details, please go to the webpage below.
Q: What is funding period in Gate.io?
1.Gate.io calculates the Funding Rate every minute, and the final Funding Rate is clamp (average value within 8 hours)
2.The funding rate rule on Gate.io is to apply the final funding rate of the previous cycle.
For instance, the funding rate calculated between 0:00 - 8:00 will be exchanged at 16:00, which operationally is more conducive for users to make judgments in advance.
Q: Where we can find Funding Rate in Gate.io?
Examples are as follows:
1,According to the capture above, the current funding rate is 0.0043%, and there is 6 hours 18 minutes, and 42 seconds remaining before the next calculation, that after 6 hours 18 minutes, and 42 seconds, the platform will apply the funding rate at 0.0043% for settlement.
2.In the meantime, to facilitate the users to make judgments in advance, users can also predict the possible changes of the direction by predicting the funding rate.
Place the mouse on "Funding Rate", it will show the predicted funding rate.
As shown in the picture above, the predicted funding rate is 0.01%, there remain 14 hours 17 minutes, and 39 seconds till the next calculation.
Predicted funding rate changes over time, until the next calculation is finished, the predicted information is for reference only.
1.Go to the bottom right corner of Perpetual Contract webpage, there's the option of Contract Details.
2.Click it and you can check Funding Rate from below webpage.
Q:Finally let's go through again the basic definitions of the terms.
1.Funding Fee - a periodic payment made to either long or short position traders, calculated based on the difference between the perpetual contract prices and spot prices.
2.Funding Rate - crypto exchanges developed a system to ensure that perpetual contract prices match the index. This is referred to as the Funding Rate.
3.Mark Price – the price on the basis of which the decision to liquidate a position is made: the Mark price is compared with the liquidation price. When compared to the trading price, the Mark Price is an estimate of a contract's genuine value.
4.Interest Rate – the difference between the rates of the base and quoted currencies - usually fixed and small.
5.Premium Index -the basis difference between the intraday price and the external price.
Q: Thanks for all, let's get to Question Session.