Funding fee: Your arbitrage profit<\/h3>\n\n\n\n
Perpetual contracts are widely offered by crypto-derivative exchanges, and it is designed similar to traditional futures contracts. <\/p>\n\n\n\n
The most important differences between traditional contracts and perpetual contracts are that perpetual contracts don\u2019t have an expiration date. Since perpetual futures contracts never settle in the traditional sense, exchanges introduced funding rates to ensure that futures prices and index prices converge on a regular basis. Funding rates are periodic payments (settled every 8 hours at UTC+0 0:00, 8:00, 16:00) either to traders that are long or short based on the difference between perpetual contract markets and spot prices:<\/p>\n\n\n\n
- When the price of the perpetual contract is much higher than that of the spot, the funding rate is positive. Thus, traders who are long pay for short positions. <\/li>
- Conversely, when the price of the perpetual contract is much lower than that of the spot, the funding rate is negative. Thus, traders who are short pay for long.<\/li>
- When the prices in the two markets are pretty close, the long position should pay interest to the short, fixed at 0.03% daily. The funding rate will be 0.01%, and the long pay to the short.<\/li><\/ul>\n\n\n\n
The funding fee is the arbitrage profit earned by the Picol arbitrage profit. The funding fee will be settled to your account every 8 hours by holding a short position in the perpetual futures market.<\/p>\n\n\n\n
According to the historical data of the ETH funding rate, in most cases, the short position will receive funding fees paid by the long position. During 2020\/9\/15-2021\/9\/16, 90% of the funding rates are settled at positive, and the max drawdown caused by the negative funding rate was only 1.28% during the whole year.<\/p>\n\n\n\n
Besides, when the prices surge, the funding fee will be extremely high, and the annualized rate of return for the arbitrage could reach up to 100%+ in one settlement.<\/p>\n\n\n\n
![\"\"](\"https:\/\/blog.picol.com\/wp-content\/uploads\/2022\/08\/\u4e8c\u6b21-709x1536-1-473x1024.png\")
<\/figure>\n\n\n\nWhy do you need the bot to arbitrage?<\/h3>\n\n\n\n
- Easy to use<\/strong>: Arbitrage in one-touch. Fill in the investment amount and then click \u201ccreate\u201d to start now.<\/li>
- Auto-settlement<\/strong>: After receiving the funding fee, the bot will automatically settle it by adding to the short position. By doing so, you can get compounding interest by auto-settlement.<\/li>
- Guaranteed<\/strong>: Your investment is protected by the SAFU program in extreme market conditions.<\/li>
- High efficiency<\/strong>: Picol only charges a fee of 0.05% for spots, which is much lower than most exchanges. Besides, compared to manual arbitraging, the bot can buy the spot and open the short position simultaneously, avoiding the increasing price gap caused by the time difference between buying and selling.<\/li><\/ol>\n\n\n\n
What are the risks of using the arbitrage bot?<\/h3>\n\n\n\n
The arbitrage bot (Moderate mode) adopts the arbitrage strategy with extremely low risk. The only risk is that the short position is auto-deleveraged (ADL) and the bot failed to sell the ETH in the spot market in time. <\/p>\n\n\n\n
However, the occurring probability of this case is extremely small. Firstly, auto-deleveraged will only happen when there is a sudden drop in the ETH price. Additionally, as the arbitrage bot (Moderate mode) is not leveraged, the short position ranked at the bottom in the ADL list.<\/p>\n\n\n\n
What are the differences between \u201cModerate mode\u201d & \u201cAggressive mode\u201d?<\/h3>\n\n\n\n
- Support earning with regulated stable coins<\/strong>: \u201cModerate mode\u201d supports earning with USDT, USDC, and BUSD, while \u201cAggressive mode\u201d only supports investing with USDT. <\/li>
- 100% fund utilization rate<\/strong>: The \u201cModerate mode\u201d has a 100% fund utilization rate, while the rate of \u201cAggressive mode\u201d is peaking at 75% (with 3x leverage).<\/li>
- Lower risk<\/strong>: The strategy \u201cModerate mode\u201d adopted is not leveraged and will never have the possibility of liquidation. However, \u201cAggressive mode\u201d keeps a short position with 1-3 times leverage.<\/li>
- No extra fee during running<\/strong>: As the position of \u201cModerate mode\u201d is not leveraged, the arbitrage bot does not need to perform auto-deleverage to decrease the risk of liquidation. You don\u2019t need to pay the fee without auto-deleverage and are free from suffering a loss caused by auto-deleverage when the bot is running.<\/li>
- \u201cAggressive mode\u201d has a more diversified setting<\/strong>: In \u201cAggressive mode\u201d, you can choose altcoins to arbitrage while you can only choose ETH to arbitrage in \u201cModerate mode\u201d. Besides, \u201cAggressive mode\u201d supports multiple customizations, including price gap control and leverage setting.<\/li><\/ul>\n\n\n\n
FAQ<\/h3>\n\n\n\n
Q: Can I start the arbitrage bot with only 100 USD?<\/strong>
A: Yes, the minimum investment required is 100 USD. And you can invest up to 250,000 USD in this bot. <\/p>\n\n\n\nQ: Does it make any difference if I invest with USDT, USDC, or BUSD?<\/strong>
A: The total rate of return will be the same no matter you invest with which stable coin. The only difference is that if you invest USDT, your profit will be settled in USDT; if you invest BUSD, your profit will be settled in BUSD, etc.<\/p>\n\n\n\nQ: Can I release profit?<\/strong>
A: No, all arbitrage profits will be auto-settled and used to add to the short position to help you to get the compound rate. \u201cWithdraw investment\u201d if you need the funds.<\/p>\n\n\n\nQ: I opened ETH\/USDT arbitrage bots in both \u201cModerate mode\u201d and \u201cAggressive mode\u201d and I find that the \u201cNext funding rate\u201d is different for these two modes, why?<\/strong>
A: Because the two modes adopt different arbitrage strategies, they kept their short position with different kinds of futures. <\/p>\n\n\n\nQ: What should I do if I find the next funding rate is negative?<\/strong>
A: It will be better to keep the bot running when the funding rate is \u2265-0.2%. If the funding rate is <-0.2% and is close to the settlement time, it would be better to close the bot. <\/p>\n\n\n\nIn most cases, the negative funding rate will be turned to positive when settled. Besides, if we also take the open and close fee into consideration, it will be better to keep the position when there is only a tiny negative funding fee payout.<\/p>\n","protected":false},"excerpt":{"rendered":"
What is Arbitrage Bot (Moderate Mode)? \u201cArbitrage bot ( …<\/p>\n
- 100% fund utilization rate<\/strong>: The \u201cModerate mode\u201d has a 100% fund utilization rate, while the rate of \u201cAggressive mode\u201d is peaking at 75% (with 3x leverage).<\/li>
- Auto-settlement<\/strong>: After receiving the funding fee, the bot will automatically settle it by adding to the short position. By doing so, you can get compounding interest by auto-settlement.<\/li>
- Easy to use<\/strong>: Arbitrage in one-touch. Fill in the investment amount and then click \u201ccreate\u201d to start now.<\/li>