What is Funding Fee Arbitrage between 2 exchanges based on different funding timing ?
The funding rate in a perpetual futures contract can be used as part of a hedge strategy in the cryptocurrency market. A hedge is a financial strategy that is designed to reduce the risk of loss from adverse price movements in an asset. In the context of cryptocurrency trading, a hedge strategy using the funding rate might involve taking opposing positions in the the futures market and collect exchanges funding fees .
Here's an example of how a hedge strategy using the funding rate might work:
First you visit Binance and Kucoin funding rate page to check the highest % return and the difference in timing between both exchanges.
Suppose that you funding rate of Bitcoin or $Solana or $link are the highest in term of yield . You take a long position or short position that yield the positive rate on the specific coin on the exchange that distribute the fees prior the second exchange where you take at the same time the same position in the opposite direction.
When the distribution occurs you close both positions at the same time collect your gains and reopen the same position in the opposite direction to collect the fees on the second exchange.
Fees are distributed 3 times a day every 8 hours yet with the method above you can collect 6 times a day and percentage might vary from 0.5 to 3 % on each collection to make a maximum of 18 % profit per day to 500 % per month with a minimal risk.
This is just one example of how a hedge strategy using the funding rate in a perpetual futures contract might work.
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