Shocking! Is there really a risk-free arbitrage strategy in the cryptocurrency market?
Today, I will reveal a "hidden benefit" in the cryptocurrency market — risk-free arbitrage with perpetual contracts! 🤑
Do you also feel that the cryptocurrency market is highly volatile and risky, and that a small mistake could lead to questioning your life? 😱
But in fact, as long as you master the right methods, risk-free arbitrage is really not a dream! 💪
How is risk-free arbitrage achieved?
The key here is the funding rate! 💰
Perpetual contracts have a mechanism called "funding rate" which is used to balance the contract price and spot price. When the contract price is higher than the spot price, longs (bullish traders) need to pay the funding fee to shorts (bearish traders); and vice versa.
The opportunity for arbitrage lies here!
When the funding rate is positive, you can short the perpetual contract while buying an equivalent amount of spot. This way, you can not only earn the funding rate but also hedge against price fluctuations. 🎯
When the funding rate is negative, you can go long on the perpetual contract while selling an equivalent amount of spot. Similarly, you can also make a stable profit! 💸
Why is it called "risk-free"?
Because the core of this strategy is hedging! Regardless of how the market price fluctuates, your spot and contract positions will offset each other, and in the end, what you earn is just the portion of the funding rate. We have observed that in a typical bull market, the performance of this strategy can achieve an annualized return of 20-30%, and in a bear market, it’s about 10% annually. 🛡️
Of course, the premise is that you must calculate the transaction fees and slippage carefully; otherwise, you might incur losses! 😅
Who is this suitable for?
This strategy is suitable for those who want to achieve excess returns without being terrified by market volatility. 🧘♀️
But be aware that arbitrage opportunities are not available all the time; you need to be patient and have a certain understanding of the market.
Final reminder
Although it is called "risk-free", the cryptocurrency market is still a high-risk area. For most ordinary people, just understanding perpetual contracts can be quite challenging, let alone earning excess returns from them. So, finding an experienced institution is also a good choice. 🚨
