Why is funding rate for some RWA tokens are 0?

[Oshosondy]

Have you noticed while trading that some RWA tokens are almost always of zero funding rate? I have been following XAU (a gold derivative), XAG (a silver derivative), MSTR (Strategy derivative) and  CRCL (Circle derivative).

I noticed their funding rate is always zero which is very good. Is there a good explanation for it?

I have noticed this for days now and still zero funding rate. I can decide to amhikd them for long and not think about any funding rate deduction.

Edit: the funding rate are not always zero all the time. This is what I have found out.

[Dr.Bitcoin_Strange]

First, this actually depends on the exchange you are using. Have you read the Binance post where they said they removed the fixed 0.01% funding fee every 8 hours and reduced it to 0% for XAU and XAG?

Assuming the perpetual contract prices of XAU and XAG remain balanced such that they are the same as the actual asset prices, then traders will enjoy a 0% funding rate. However, in a market where there are lots of long positions pushing the perpetual contract price higher, the funding rate can become positive again and will no longer be 0%, unless the exchange you are using specifically allows those RWA contracts with a 0% funding rate.

I believe each exchange has its own method or formula for calculating funding rates. Aside from that, the funding rate can still be 0% based on the explanation I gave and examples below.

Take, for example:

- The actual price of gold is $4,000 and the perpetual contract price is also $4,000. The price difference is $0, so the funding rate becomes 0%.
- If the actual asset price is $4,000 and the perpetual contract price is $4,500, the price difference is $500, so the funding rate would not be 0% because long position holders would be paying short traders.

To put it another way, you know that spot trading for RWAs like XAU and XAG closes on weekends, but their perpetual contracts can still trade 24/7 on exchanges during that period, right? If, due to excessive long positions, the perpetual contract price trades higher than the index price of the underlying asset, the funding rate will become positive and long traders will pay short traders. Vice versa.

When the market opens again on Monday and spot traders start buying and selling, it can help bring the perpetual contract price and the actual asset price back into balance, causing the funding rate to return to 0%. You can relate this to the examples I gave above.

So, when you see a 0% funding rate, it simply means there is little or no imbalance between buyers and sellers, or that the exchange's funding rate model currently results in no funding payments.

In conclusion, if you are seeing 0% funding rates for the XAU, XAG, and MSTR contracts you have been holding for days, it probably means that there is little imbalance between long and short traders.

I would also advise you to check other exchanges to confirm whether they charge funding fees when holding these contracts for several days, since some exchanges set their funding rates at 0% for certain assets like this ones.

[shinratensei_]

Beside the reply above that clearly explained the 0% IR rate by crypto exchange for RWA tokens, you also need to consider funding rate being close to 0% which in this case you are only paying for premium index which doesn't happen too often to RWA token at market hour as just promotional phase for attracting users, not saying it will not be there for quite a while, the 0% IR will be there for years maybe but even though it looks permanent there is always a chance that those cex will raise IR.

The real carry cost for commodities like gold and stock is ranging around 3-4%. Most exchange zeroed out the IR because they were using 11% annualized IR specifically tailored for crypto which isn't right for RWA token might be the real reason.

[sergiorus]

Have you noticed while trading that some RWA tokens are almost always of zero funding rate? I have been following XAU (a gold derivative), XAG (a silver derivative), MSTR (Strategy derivative) and  CRCL (Circle derivative).

I noticed their funding rate is always zero which is very good. Is there a good explanation for it?

I have noticed this for days now and still zero funding rate. I can decide to amhikd them for long and not think about any funding rate deduction.

No I haven't noticed that. Which exchange are you using?

I trade on OKX, getting squeezed like a lemon on the funding. For Circle (CRCL) is currently more than 0.07% that's crazy. But its price is still sitting at the bottom and people keep longing it so I get it.

The rest of the RWA you listed all have pretty high funding on there too. Maybe you just use an exchange with nearly zero open interest on those assets?

[joniboini]

I scrolled some of OP's post history and can't pinpoint which exchange he's referring to either. Judging from one of their post there's a possibility he's using different exchanges for different purpose too. Anyway, another answer from OP would solve this. I'm curious though, is Circle and MSTR really that attractive as a derivative token? Why not put those funds to trade Bitcoin or gold?

[sergiorus]

I scrolled some of OP's post history and can't pinpoint which exchange he's referring to either. Judging from one of their post there's a possibility he's using different exchanges for different purpose too. Anyway, another answer from OP would solve this.

I've done the same and also noticed that the OP basically never replies in their own threads even when important questions from other users arise. That doesn't necessarily mean their threads are low quality or something. Just saying.

For example, I would really love to know which exchange somehow doesn't have funding on perpetual (assuming they are perpetual) futures.

Since perp futures are the epitome of the free market, and he who demands will always have to pay I can only think of a short-term incentivisation campain by the exchange covering the funding fees, but that sounds improbable given the current times.

Another option is the OP simply confused something and those were not perpetual futures but some similarly looking but different product.

[Bitcoin_Arena]

Probably because the funding mechanism that got RWA token derivatives is different from that of the usual perpetual contracts we know about. Also let us not forget that the crypto spot and perpetual contract prices are way more volatile than the RWA prices. This can easily cause a huge difference in the funding rates.

[Oshosondy]

I have edited the topic title of this thread when I noticed that the funding rate are not always zero.

This was what I posted on the other forum about it:

I noticed today that the funding rate shifted from 0 to positive on few pairs, while shifted to negative on a pair. This means I was wrong about it all this time.

It was XAU and XAG that I started noticing it, thinking other RWA tokens are also like that but I am wrong. XAU and XAG remain at 0 funding rate as I was about to posted this but others are changing sometimes.

So I do not even know if the XAU and XAG will also later change but I am watching both on 4 exchanges. It has a reason the percentage of the funding rate are there, it can change. Do not rely on the zero funding rate.
Modify message

But I also later noticed that the funding rate for XAU and XAG also later changed from zero to some percentage. I will prefer a month future market XAU before it expires but no funding rate, but I do not know any exchange offering the same for XAG.

[joniboini]

So what about the exchanges you're referring to? I think some people already asked for it in the replies. Do you think the answer to that question is not important to find your answers? If every exchange changes their funding rate not in a monthly basis I don't think your preference will get answered either. I guess we can only look at their ToS and see how often they changed the funding rate and other stuffs. Judging from a single metric is a bad idea to begin with.

[sergiorus]

It's not the first time I've noticed this person never even reading replies in their threads...

They create a little bit too much of them, which is not a problem per se, but they don't keep track of any of them.

I'm actually considering just ignoring them at this point, as it doesn't seem the person *needs* any of the help or replies at all.

[Oshosondy]

No I haven't noticed that. Which exchange are you using?

I thought I did not need to mention the exchanges that I am using for it when I posted again. You can read my last post before this one. This is to let joniboini and sergiorus know that I am reading what other people posted. So I saw sergiorus no sense post, which is the reason I posted this.

So what about the exchanges you're referring to? I think some people already asked for it in the replies. Do you think the answer to that question is not important to find your answers? If every exchange changes their funding rate not in a monthly basis I don't think your preference will get answered either. I guess we can only look at their ToS and see how often they changed the funding rate and other stuffs. Judging from a single metric is a bad idea to begin with.

You are the one that is not following this thread, read what I posted last. I do not need to mention the name of the exchanges after my last reply. Read everything someone has posted before saying what is not.


This was what I posted last:

I have edited the topic title of this thread when I noticed that the funding rate are not always zero.

This was what I posted on the other forum about it:

I noticed today that the funding rate shifted from 0 to positive on few pairs, while shifted to negative on a pair. This means I was wrong about it all this time.

It was XAU and XAG that I started noticing it, thinking other RWA tokens are also like that but I am wrong. XAU and XAG remain at 0 funding rate as I was about to posted this but others are changing sometimes.

So I do not even know if the XAU and XAG will also later change but I am watching both on 4 exchanges. It has a reason the percentage of the funding rate are there, it can change. Do not rely on the zero funding rate.
Modify message

But I also later noticed that the funding rate for XAU and XAG also later changed from zero to some percentage. I will prefer a month future market XAU before it expires but no funding rate, but I do not know any exchange offering the same for XAG.

So no need for me to mention the name of the exchanges.

I did not know sergiorus is as stupid as this, for not reading what I posted and posting rubbish.

[BitMaxz]

Based on what I know, gold, silver, and anything related to forex and FX brokers do not use funding fees.

That is what I understand from brokers, but it looks like based on what I read from Binance, they never remove the funding fees for any precious metal; they just adjusted it a little lower based on what I heard, but they never remove funding fees for any tradfi.

[Charles-Tim]

Based on what I know, gold, silver, and anything related to forex and FX brokers do not use funding fees.

That is what I understand from brokers, but it looks like based on what I read from Binance, they never remove the funding fees for any precious metal; they just adjusted it a little lower based on what I heard, but they never remove funding fees for any tradfi.

Brokers has ways of charging money from customers for leaving their trades opened.

It is true that the funding rate on the traditional assets are lower than crypto assets, it may look as if it is not having any funding rate at times. But, later, traders will see the funding rate again.

Everything on crypto exchanges has funding rate as long as it is perpetual.

[BitMaxz]

Brokers has ways of charging money from customers for leaving their trades opened.

It is true that the funding rate on the traditional assets are lower than crypto assets, it may look as if it is not having any funding rate at times. But, later, traders will see the funding rate again.

Everything on crypto exchanges has funding rate as long as it is perpetual.

Crypto exchange charge funding rates but in forex or from FX brokers the only way they charge to those who are holding a position for too long is the commission fees and rollover fee.
The rollover fee or swap fee looks similar to funding rates; the only difference is this one is charge every 24 hours not every 8 hours. It seems the it is way cheaper to trade on an FX broker or from Forex.
Honestly, I also trading with a microaccount in XM; they also have crypto there and run 24/7. Even if it is crypto to USD, the fees are still not similar to crypto exchanges; they are still the same as forex.

I might switch to FX maybe, but I am more familiar with crypto exchanges compared to forex or FX brokers.
I am practicing forex and other brokers because I am planning to try taking prop firms to get a chance accessing big capital.

[FinneysTrueVision]

The exchange name would have been important context because it is not at 0 on all exchanges. It is not the same situation on Hyperliquid, which is the only perpetual exchange where I am active enough to pay attention to funding rates.

I suppose the rate was at zero because there was no premium at the time you looked at it and it went to the base rate. Exchanges like Binance might be trying to make their rates really low to attract more people to trade RWA assets through them.

I'm curious though, is Circle and MSTR really that attractive as a derivative token? Why not put those funds to trade Bitcoin or gold?

MSTR has been going only down for a long time. It would have been a good idea to short its price during the bear market. As long as Saylor keeps diluting shareholders, it presents a good opportunity to make profit for short sellers.

[nelson4lov]

I think it is 0% most of the time because it's a new product that exchanges are trying to market as much as possible to their users so they right to make it more than appealing for their users. I can't remember if it's the same on hyperLiquid because I could remember trying to long NVDA during the 165 dip a few months ago and I had to close the position much earlier than I would've liked due to the high funding fee at the time. It only changes from 0% during periods of high volatility in my usageon both bybit and hyperLiquid.

[Oshosondy]

The exchange name would have been important context because it is not at 0 on all exchanges. It is not the same situation on Hyperliquid, which is the only perpetual exchange where I am active enough to pay attention to funding rates.

I use many exchanges for it, not just one exchange. At the time that I wanted to post this topic, I remember that I checked the price of three exchanges which are Binance, Bybit and MEXC.

It is like that on more centralized exchanges.

But people should know that it is not always zero, they should not be fooled with the zero that they will see at times.