How funding rate arbitrage works
There is exactly one source of return, which is why it can be described precisely: the funding rate that perpetual contracts settle every eight hours. The four steps below trace it from spotting the opportunity to money landing in the account, and what each step costs.
The edge is that returns do not depend on which way price moves
Whether BTC rises or falls, matched notional on both legs leaves the funding collected for that period unchanged. The periods where the rate turns negative are paid out of this side — that is visible in the year-by-year table, not hidden.
Watch the rate
Funding rates on perpetual contracts are monitored continuously. A positive rate means longs pay shorts; a negative rate means the reverse.
Open the hedge
Buy spot and short the perpetual at matched notional. The two legs cancel each other out as price moves, so directional exposure goes to zero.
Collect funding
Funding settles every 8 hours at 00:00, 08:00 and 16:00 UTC. Nothing has to be timed by hand, and the amount does not depend on which way price went.
Interest-free 10x principal
The multiple comes from the exchange's own position rules rather than a loan, so there is no hourly interest accruing against the account. Principal scales to 10x while directional exposure stays at zero: across 2021–2025 that moves the average annual figure from 12.43% to 124.296%, credited period by period.
Why this payment exists at all
One source of return, so it can be stated plainly
Perpetual futures have no expiry, so exchanges use the funding rate to pull the contract back toward spot. When the rate is positive longs pay shorts — this side holds the leg that gets paid, while the other leg cancels the price move. That is not a forecast; it is collecting a payment the contract rules oblige somebody to make.
scale principal 10x without directional risk — exchange rules, not borrowed money
The multiple is notional ÷ capital deployed, and it is the only reason funding income scales. It is not borrowed: it comes from the exchange's own position rules, and the capital used to scale carries no interest. Conventional margin charges hourly interest on the quote currency — at 10x that is interest on roughly nine tenths of the notional, taken straight out of the funding. There is no such debt here. What scales is the size of the position, not the directional exposure: matched notional on both legs is unchanged. The other side of the multiple is on the risk page, not hidden.
Four cost lines are deducted, not one
Plenty of published "returns" deduct only the futures-leg fee. The real cost also includes the spot-leg fee, the cost of the capital used to scale, and slippage. Leave one out and the strategy looks unusually profitable — nothing errors, the net figure is simply overstated. All four are recorded and traceable per fill, including the one that settles at zero because it carries no interest.
The denominator is sampled at the settlement instant
Look up account equity afterwards and every deposit, withdrawal and size change in between is baked in, which produces a different number. The collector takes its reading at each of the three settlement points and writes down the equity as it stood — which is why every return figure carries the sample count that produced it.
Four cost lines are deducted, not one
Plenty of published "returns" deduct only the futures-leg fee. Leave one line out and the strategy looks unusually profitable — nothing errors, the net figure is simply overstated. All five below are traceable per fill, including the one that settles at zero because it carries no interest.
Charged on entry and on exit, against filled notional
Both legs are recorded, not just the futures one
The multiple comes from exchange position rules, not from a loan
Measured as average fill price against the mark price at order time
What it still costs to close the position, current notional times the exit fee rate
No specific fee percentages are quoted here. This project publishes no fee schedule, and printing something like "around 0.06%" would make it the one number on this page with no source behind it.
How this differs from common practice
The left column describes falsifiable industry habits, unnamed and without adjectives — naming somebody means producing evidence, and this page cannot. Every entry in the right column has a corresponding implementation elsewhere on this site.
| Topic | Common practice | Here |
|---|---|---|
| How costs are deducted | Only the futures-leg fee | Four lines: futures-leg fee, spot-leg fee, cost of scaling capital, slippage |
| Denominator of the return | Account equity looked up afterwards, with deposits and size changes baked in | Sampled at each of the three settlement points, with the equity of that moment written down |
| The worst year | Usually omitted; only the average is shown | ETHUSDT returned 7.873% across 2022, shown at the same size as the good years |
| Ability to pay | A sentence promising that funds are sufficient | A solvency ratio recorded by an end-of-day job, plotted against its threshold over the last 30 days |
| Where the money sits | Transferred to the platform, followed by an assurance that funds are sufficient | Also held in a dedicated platform account — the difference is that the solvency ratio is recorded daily and alerts on the overview page when it breaches the threshold |
| Withdrawals | Contact support to ask about progress | Self-service, with approval status traceable end to end |
Scaling principal 10x without directional risk
The principal multiple is notional ÷ capital deployed, and it is the only reason funding income scales.It is not borrowed: it comes from the exchange's own position rules, and the capital used to scale carries no interest. Conventional margin charges hourly interest on the quote currency — at 10x that is interest on roughly nine tenths of the notional, taken straight out of the funding. There is no such debt here, so what the multiple adds is net.
What scales is the size of the position, not the directional exposure — matched notional on both legs is unchanged. The cost is written on another page: the same multiple that scales the return scales cost and volatility with it. Across 2021–2025 the average annual figure moves from 12.43% to 124.296%, and the worst year is scaled by the same factor to 7.873%.