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What is the difference between Funding Rate and Funding Fees?

Funding Rate and Funding Fees are two related but different concepts in perpetual futures contracts trading.

Funding Rate is a variable interest rate that is periodically charged to traders who hold a position in a perpetual futures contract. The Funding Rate is used to maintain the balance between the perpetual futures market price and the underlying asset price. The Funding Rate is calculated based on the difference between the perpetual futures contract price and the underlying asset price, as well as the level of leverage being used in the position. The Funding Rate is usually expressed as a percentage and is charged or paid every funding interval, which is typically every 8 hours in most cryptocurrency exchanges.

Funding Fees, on the other hand, refer to the actual fees charged or paid by traders as a result of the Funding Rate. The Funding Fees are calculated by multiplying the Funding Rate by the position value. If the Funding Rate is positive, traders who hold a long position in the perpetual futures contract will pay the Funding Fee, while traders who hold a short position will receive the Funding Fee. Conversely, if the Funding Rate is negative, traders who hold a long position will receive the Funding Fee, while traders who hold a short position will pay the Funding Fee.

In summary, the Funding Rate is a variable interest rate used to maintain the balance between the perpetual futures market price and the underlying asset price, while the Funding Fees are the actual fees charged or paid by traders as a result of the Funding Rate.
 

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