{"id":5440,"date":"2022-03-11T16:28:49","date_gmt":"2022-03-11T08:28:49","guid":{"rendered":"https:\/\/blog.btse.com\/?p=4184"},"modified":"2023-03-09T07:43:33","modified_gmt":"2023-03-09T07:43:33","slug":"btse-futures-what-is-funding-rate","status":"publish","type":"post","link":"https:\/\/www.btse.com\/blog\/btse-futures-what-is-funding-rate\/","title":{"rendered":"BTSE Futures: What Is Funding Rate?"},"content":{"rendered":"

The funding rate is a fundamental aspect to take into account when trading perpetual futures contracts. This article looks at funding rates in detail. Meanwhile, to learn more about how to trade futures on BTSE, take a look at this <\/span>complete guide<\/span><\/a>.\u00a0<\/span><\/p>\n

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Funding Rate: How It Works<\/b><\/h2>\n

BTSE is among a small number of exchanges offering both traditional and perpetual futures contracts. While traditional futures have specific expiration dates, perpetual futures are more similar to spot trading because they do not expire until you close your position.\u00a0<\/span><\/p>\n

For this reason, additional tools are required to make sure that the price of futures contracts remains fairly close to the index price \u2013 this is where the funding rate plays a part in perpetual futures contracts.\u00a0<\/span><\/p>\n

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The Role of Funding Rates<\/b><\/h2>\n

Futures contracts are derivatives that derive their prices from an underlying asset. Therefore, exchanges like BTSE need to make sure that the price of the derivative and the price of its underlying asset does not differ too much from each other.\u00a0<\/span><\/p>\n

This is why futures exchanges use funding rates, which are constantly recalculated to identify differences and minimize them \u2013 on BTSE, the funding rate is charged or received every hour.\u00a0<\/span><\/p>\n

In simple terms, the funding rate is the amount of money paid to or taken from open positions, in order to reduce the differences between prices:\u00a0<\/span><\/p>\n