Updated: Jul 15, 2020
To explain to you Bitmex Funding Rates, you have to know that it is not related directly with leverage you choose. Funding Rate applies only to Bitcoin and Ethereum perpetual contracts here.
Some people familiar with Forex market expect that BitMEX has hidden fees like FX brokers have (overnight swaps). But they don't. There is no extra fees on BitMEX platform if you use leverage for Long and Short positions.
Funding Rate - BitMEX gives one and the other takes
Holding opened trade and leverage is completely free of charge on Bitmex exchange.
There are no so-called swaps.
We should not, however, confuse this with the Funding Rate, where BitMEX takes one and the other traders give exactly the same amount, so Bitmex alone does not earn anything at all.
This is done every day exactly every 8 hours. Already 16 hours before the settlement, we know what the rate in percent will probably be and who will earn: holders LONG or SHORT.
Then it may change a bit and it is fixed at 8h before the settlement time. So, we have a lot of time to possibly adjust our position.
We always know sooner whether Short's holders will pay Long or vice versa. This information is displayed on the platform ahead.
3 examples how to count BitMEX Funding Rates:
1. Next Funding Rate is: 0.07% (plus means long pays short)
We have the SHORT position of 13,000 perpetual XBT contracts.
Now regardless of the leverage we use, how many remaining funds are still in the BitMEX account and regardless of the current BTC price, we count:
13,000 * 0.07% = $ 9.10 converted immediately to BTC at the current exchange rate
(for example, at the price of $ 12000 for BTC it would be 0.0008 BTC added to our funds)
2. The next Funding Rate is: -0.02% (minus means short pays long)
We have the SHORT position of 25,000 perpetual XBT contracts (BTC price $12,000)
We count as above: 25,000 * (0.02%) = $ 5 converted immediately to BTC at the current exchange rate: $5 / $12000 = -0,0002 BTC will be deducted to our account.
Long owners will get extra 0,0002 BTC
3. An extreme example, but it happens:
The next Funding Rate is: 0.39% (plus means long pays short), 20,000 Bitcoin perpetual contracts. (BTC price $12,000)
The calculation is simple again:
Long? We pay 0.39% * 20,000 = - $ 78 (in BTC) so $78 / $12000 = -0,0065 BTC
Short? This will get 0.39% * 20,000 = 0,0065 BTC
Why does BitMEX use the Funding Rate on Bitcoin and ETH perpetual contracts?
It forces trading on the platform. Bitmex loves traders who constantly buy and sell, because they earn only on fees from active trading.
Traders often ask us if they will open a position a moment ago when the Funding Rate is calculated and they will still be able to close whether it will affect them?
The answer is simple: you will get paid or you will be charged if you have an open position in this particular second. You can even open one second before and close the second after to be affected.
Funding Rate on BitMEX applies only to the Bitcoin and ETH perpetual contracts, all other futures contracts for both Bitcoin and other cryptocurrencies are free of Funding Rate.
It is worth to notice that usually a higher percentage Funding Rate (0.15-0.45%) is during greater market volatility when we have 5% to 10% price change during a day.
Questions? Write to us. We help traders who have created account at BitMEX through our link and have 10% discount on commissions on BitMEX.
Read more about BitMEX exchange:
1. Bitmex guide how to start trading-interwiew
3. BitMEX knowledge here.