The underlying assets of Digital Perpetual Contract are spot assets like BTC and other digital currencies. In order to keep the stability of the platform market and spot market, 58COIN uses Funding as spot price tethering mechanism.
58COIN does not charge any fees on funding; it is exchanged directly peer-to-peer.
The Funding Rate is comprised of two main parts: the Interest Rate and the Premium / Discount. Funding Interval = 1, the funding occurs every 24 hours at 18:00 (GMT +8).
The Funding Rate is comprised of two main parts: the Interest Rate and the Premium / Discount.
Interest Rate Component:
Every contract traded on 58COIN consists of two instruments: a Base currency and a Quote currency. The Interest Rate is a function of interest rates between these two currencies. The source borrow market is stated for each Interest Index.
Premium / Discount Component:
The perpetual contract may trade at a significant premium or discount to the Mark Price. In those situations, a Premium Index will be used to raise or lower the next Funding Rate to levels consistent with where the contract is trading.
Premium Index (P) = Impact Median Price / Index Price - 1
Impact Median Price = Avg (Impact Bid Price, Impact Ask Price), where
Impact Bid Price = The average fill price to execute the Impact Margin Notional on the Bid side
Impact Ask Price = The average fill price to execute the Impact Margin Notional on the Ask side
Final Funding Rate Calculation
The Funding Rate is next calculated with the 8-Hour Interest Rate Component and the 8-Hour Premium / Discount Component. A +/-0.03% dampener is added.
Funding Rate (F) = Premium Index (P) + clamp(Interest Rate (I) - Premium Index (P), 0.03%, -0.03%)
This calculated Funding Rate is then applied to a trader's Position Value to determine the Funding Amount to be paid or received at the Funding Timestamp.
Funding Rate Caps
58COIN imposes caps on the Funding Rate to ensure the maximum leverage can still be utilized. To do this, two caps are imposed:
- The absolute Funding Rate is capped at 75% of the Initial Margin - Maintenance Margin. If the Initial Margin is 1% and the Maintenance Margin is 0.5%, the maximum Funding Rate will be 75% * (1% - 0.5%)= 0.375%.
- The Funding Rate may not change by more than 75% of the Maintenance Margin between Funding Intervals.
(Note: 58COIN has closed the Funding Mechanism indefinitely since 18:00 on Dec. 17, 2018 (GMT +8))