Unlike traditional futures, perpetual swap does not have a predetermined expiry date. Funding rate plays the role of adjusting perpetual mark and BIT index.
When perpetual swap trades above index price (Mark Price > Index Price), long perpetual accounts will need to pay funding fee to short perpetual accounts, so as to incentivize short trades.
When perpetual swap trades below index price (Mark Price < Index Price), short perpetual accounts will need to pay funding fee to long perpetual accounts, so as to incentivize long trades.
What is the funding rate?
The funding rate is calculated based on the price deviation between the perpetual market and the spot market. The purpose is to anchor the perpetual market price to the spot index. When the funding rate is positive, the longs need to pay the shorts for funding; if the funding When the rate is negative, shorts pay longs for funding. When the funding rate is 0, there is no funding fee to each other.
Calculation of Funding Rate
BIT generates the funding rate for the next 10 seconds every 10 seconds.
Step 1: Calculate Premium Rate = (Mark Price - BIT Index Price) / BIT Index Price * 100%
Step 2: Calculate Funding Rate = Max[0.05%, Premium Rate] + Min[-0.05%, Premium Rate]
8h avg funding rate = average of the 10s funding rates generated in the last 8 hours
*The upper and lower limits of the funding rate is as follows:
| Contract | Funding Rate Limit |
| SOLUSD PERP | [-1.5%, 1.5%] |
| Other Perpetual Contracts | [-0.5%, 0.5%] |
*In order to better protect the rights and interests of users, BIT risk team may adjust the upper and lower limits of the funding rate in real time according to market conditions
*The mark price and index price used when calculating the funding rate are valued at the moment when the funding rate is generated
Funding rate example:
Take BTC perpetual as an example:
|
Index |
Mark |
Premium Rate |
Funding Rate |
|
55143.54 |
55131.00 |
0.023% |
0 |
|
55140.87 |
55190.03 |
0.089% |
0.039% |
|
55142.28 |
55742.56 |
1.088% |
0.5% |
Calculation of capital costs
BIT uses a 10-second interval funding model instead of an 8-hour model.
The system performs a charge calculation every 10 seconds, and each transaction will also trigger a charge calculation. The capital cost is included in the realized profit and loss, and the realized profit and loss is settled to the cash balance at 16:00 every day.
Funding fee=-1*funding rate*currency-based position*holding time fraction
*Holding time fraction = current holding time/8hrB
The current position holding time is 6 seconds, then the current position holding time fraction is 6/(8*3600)
Example of Funding Charges:
Example 1: Take the time interval from 15:20:40 to 15:20:50 as an example, the current funding rate is 0.011%, there is no position change in this 10-second period, and the user's position is 6btc;
Then the user holds the position for 10 seconds, and the capital cost=-1*0.011%*6*[10/(8*3600)]
Example 2: Taking the time interval from 15:20:50 to 15:20:60 as an example, the current funding rate is 0.014%, and one transaction occurs at 15:20:53. The user’s position before the transaction is 6btc, and after the transaction The position is 7btc. Due to the change of the position within the 10s interval, the calculation of capital cost needs to be calculated separately:
Then the user holds a position at 15:20:50-15:20:53, and the capital cost=-1*0.014%*6*[3/(8*3600)]
The user holds a position at 15:20:53-15:20:60, and the capital cost=-1*0.014%*7*[7/(8*3600)]