Bitmex perpetual swap and funding rate

  • No KYC requirements
  • High Leverage
  • Altcoin futures
Bitmex

Swaps

Many traders don’t like it that their positions “expired.” They often don’t understand why they have no position open anymore. Bitmex created a contract that never expires. They created a “synthetic margin trading instrument” because many crypto traders understand margin trading, but when they move to the derivative space, they get confused. To solve that issue, Bitmex created a perpetual swap that doesn’t have an expiry date. They have created a never-ending sequence of 8-hour future contracts, and they charge interest rates based on the premium discount observed between the actual price of a swap contract and the underlying price of BTC. They take an 8-hour T-wap every minute and check the premium or discount of the swap, and they will charge that as a funding rate in the future. Your funding payment is the size of your position in BTC times the funding rate. They charge this funding every 8 hours.

Negative funding rate
Funding = Position Value * Funding Rate
By default, it is perpetual.

Sentiment

In many cases, when for a prolonged period, there are positive funding rates (longs will pay, and shorts will receive), leading to the price being temporarily pushed down.

Extreme positive funding rate
Extreme negative funding rate

Funding Mean Reversion Strategy

After over a year in existence, Bitmex decided to release a blog post about analyzing predictive properties of the funding rate with their question: “can you predict the future price of Bitcoin by the published funding rate?”

Markets can stay irrational longer than you can stay solvent.

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Bitmex

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