FundingGapWhat is funding rate arbitrage?
Funding rate arbitrage means holding the same coin long on one exchange and short on another, so price moves cancel out, while you collect the difference between the two funding rates.
Perpetual futures and the funding rate
A perpetual future is a futures contract with no expiry date. To keep its price close to the spot price, exchanges use a funding rate: a periodic payment between long and short holders.
- When the funding rate is positive, longs pay shorts. This usually happens when the perpetual trades above spot because more traders want to be long.
- When it is negative, shorts pay longs.
The payment is a percentage of your position's notional value, not of your margin, so leverage does not change the rate you pay or receive. Most contracts settle every 8 hours, some every 4, 2 or 1 hour, and Hyperliquid settles every hour.
Why rates differ between exchanges
Each exchange computes funding from its own order book, its own traders and its own formula. The same coin can pay +0.03% every 8 hours on one exchange and +0.005% on another, or even be negative on a third. That gap is what this strategy collects.
How the trade works
- Short the coin on the exchange with the higher funding rate. As a short you receive funding when it is positive.
- Long the same amount on the exchange with the lower funding rate. As a long you pay the low rate, or receive funding if it is negative.
- The two positions are delta-neutral: if the price rises, the long gains roughly what the short loses, and vice versa.
- What remains is the funding spread: you earn the high rate and pay the low rate on every settlement.
You do not need to predict the price. You need the spread to stay positive long enough to cover your trading costs.
A worked example
Say coin X pays +0.030% per 8 hours on exchange A and +0.005% per 8 hours on exchange B. You put $10,000 of capital to work at 1x leverage, half on each exchange, so each leg is a $5,000 position.
| Item | Calculation | Result |
|---|---|---|
| Funding spread | 0.030% − 0.005% per 8h | 0.025% per 8h |
| Annualised (APR) | 0.025% × 3 × 365 | 27.4% |
| Funding over 7 days | $5,000 × 0.025% × 21 settlements | +$26.25 |
| Trading fees | 4 taker orders × 0.05% × $5,000 | −$10.00 |
| Bid/ask spread | 0.02% per side, crossed in and out on both legs | −$2.00 |
| Estimated net | +$14.25 |
The fees and spread are paid once, while funding accrues every day. Here it takes about 3.2 days of funding ($3.75 a day) to cover the $12 of costs. Hold for a single day and you lose money; hold for a month and costs are a small fraction of the income, as long as the spread holds.
This is why FundingGap ranks opportunities by estimated net profit after fees and spread for a chosen holding period, not by raw APR. The highest APR is often on an illiquid coin whose bid/ask spread wipes out days of funding.
What can go wrong
The trade is market-neutral, not risk-free. The main risks are:
- The spread can close or reverse. Funding rates move every settlement. A spread that appeared an hour ago can disappear just as fast.
- One leg can be liquidated. Each leg has its own margin. A sharp move can liquidate the losing side before you top it up, leaving you with an unhedged position.
- Prices differ between exchanges, so entry and exit prices of the two legs will not match exactly.
- Exchange risk: outages, withdrawal freezes, or worse.
Read the full list in Risks of funding rate arbitrage.
How FundingGap helps
FundingGap pulls live funding rates from Binance, OKX, Bybit, Bitget, Gate and Hyperliquid every 30 seconds, matches the same coin across exchanges, normalises every rate to the same time basis, and picks the best long/short pair for each coin. Each coin's detail view shows settled funding history, a stability badge, order book depth for your position size and a rough liquidation estimate.
See exactly how the numbers are produced in How FundingGap calculates net APR, or open the live scanner.