Order Flow Getting Started Tutorial
Large-amount entrusted orders (main orders)
Liquidation Heatmap
Liquidation Map
Basic introduction to order flow
What is order flow?
Order Flow Getting Started Tutorial
Order flow
What is the long-short position accounts ratio?
Manual of contract data for newer
Risk management in contract trading
Commonly used indicators for contract data
Costs in cryptocurrency trading
What positive or negative funding rates means?
Arbitrage opportunities in the cryptocurrency market
What are terms mark price、last price and estimated liquidation price?
What determined funding rate?
Basis and premium
Liquidation and delivery
What are USDT contract and USD contract?
What difference between open interest and trading volume?
Differences between cryptocurrency perpetual contract trading and leverage trading
How to keep balance for price in perpetual contracts and spot?
What categories of cryptocurrency derivatives?
What are Golden Cross and Death Cross, and how are they used in trading?
What is liquidity
What is VWAP indicator and how to use it in cryptocurrency trading?
What is the RSI indicator, how to see overbought and oversold?
How to Read Order Book Data?
The Analysis and Trading Applications of Long-Short Position Ratio and Open Interest
The Significance and Application of Cryptocurrency Liquidation Data
How is funding rate calculated for cryptocurrency perpetual contracts?
How to interpret the open interest data of cryptocurrency contracts?
What is the purpose of the cryptocurrency funding rate?
What is Top trader account long/short ratio
What is exchange top trader positions long/short ratio
What is Bitcoin open interest?
What is perpetual contract funding rate?
What is BTC liquidation or what is cryptocurrency liquidation?

How to keep balance for price in perpetual contracts and spot?

The exchange maintains the balance between the prices of cryptocurrency perpetual contracts and spot markets primarily through the funding rate mechanism.

The funding rate is a periodic fee that facilitates the convergence of contract prices to spot prices through exchanges between traders.

When there is a significant difference between the perpetual contract price and the spot price, the exchange calculates the funding rate based on market conditions and collects or pays funding fees from long position holders to short position holders. If the perpetual contract price is higher than the spot price, long position holders need to pay funding fees to short position holders. Conversely, if the perpetual contract price is lower than the spot price, short position holders need to pay funding fees to long position holders. This mechanism encourages traders to keep the contract price close to the spot price, thereby avoiding potential arbitrage opportunities.

Through the funding rate mechanism, the exchange can maintain the balance between the prices of cryptocurrency perpetual contracts and spot markets, ensuring that the price difference between the contract market and the spot market remains within a small range.


Disclaimer:
Information content does not constitute investment advice, investors should make independent decisions and bear their own risks