What is Funding Spread?
Funding spread is the difference between the funding rates two exchanges charge on the same perpetual contract at the same moment. It is the raw edge in a delta-neutral funding-arbitrage trade: you go long where funding is lower and short where it is higher, collecting the gap.
A funding spread measures how far apart two venues price the cost of holding a perpetual position on the identical underlying asset. If Binance charges BTC longs 0.010% per 8-hour interval while Hyperliquid charges BTC longs only 0.004% over the same window, the spread between the two is 0.006% per interval. That number, not either rate alone, is what a delta-neutral arbitrageur actually earns.
The trade is direction-neutral by construction. You open a long on the exchange with the lower (or negative) funding and an equal-notional short on the exchange with the higher funding. Price moves cancel between the two legs, so your profit is the funding you collect on the short plus the funding you receive (or avoid paying) on the long — the full spread. Because both legs settle funding on their own schedules, the spread must be annualized on a per-interval basis to compare opportunities fairly (see the formula below).
The headline spread is gross. Real net edge subtracts entry and exit taker fees on both legs and the slippage of walking each orderbook for your size. A 0.014%/8h spread annualizes near 15% APR, but if round-trip taker fees plus slippage cost 0.20% of notional, you need the spread to persist long enough for accrued funding to clear that fixed cost before it converges. This is why a realistic backtester that nets funding against real orderbook cost matters far more than the raw spread on a screener.
Spreads exist because funding rates are set independently per venue from local order flow, and they mean-revert as arbitrageurs pile in. The widest, most durable spreads tend to appear on thinner alts and newer DEXs where fewer participants are closing the gap — but those are exactly the venues where slippage and liquidity risk are highest, so the gross spread and the achievable net spread can diverge sharply.
Annualized funding spread (per-interval basis)
spread_per_interval = fundingRate_short − fundingRate_long periods_per_year = (24 / interval_hours) × 365 spread_APR = spread_per_interval × periods_per_year
Both legs must share the same interval basis. Example: 0.014% per 8h → 0.014% × (24/8 × 365) = 0.014% × 1095 = 15.33% APR gross, before fees and slippage.
BTC funding spread, Binance vs Hyperliquid (8h interval)
- •Short leg — Binance BTC funding: +0.010% per 8h (longs pay)
- •Long leg — Hyperliquid BTC funding: +0.004% per 8h
- •Gross spread = 0.010% − 0.004% = 0.006% per 8h
- •Annualized = 0.006% × 1095 = 6.57% APR gross
- •Round-trip cost (taker fees + slippage, both legs): ≈0.18% of notional
- •Break-even hold ≈ 0.18% / 0.006% = 30 intervals ≈ 10 days before net-positive
FAQ
What is a good funding spread for arbitrage?
There is no fixed threshold — what matters is net spread after fees and slippage, and how long it persists. A 5–10% gross APR spread is common on majors; the edge only survives if the spread stays open long enough for accrued funding to clear your round-trip trading cost.
How is a funding spread different from a price spread?
A funding spread is the gap between the two venues’ funding rates and is what a delta-neutral trade harvests over time. A price (basis) spread is the momentary gap between the mark prices themselves, which is an execution cost you pay entering and exiting, not a source of ongoing yield.
Why do funding spreads disappear?
Funding rates mean-revert because arbitrageurs open positions that push each venue’s rate back toward the market. As capital floods the wider side, the spread compresses — which is why durable spreads mostly persist on thin alts and new DEXs where fewer arbitrageurs are active.
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