Hi all,
I've done some research on BitMex funding rate. The reason for this was simple, there are similar anomalies in the market caused by interest rates being paid/charged overnight, such a kind of strategy on FX is also known as carry trade and is proven to work by many research papers out there.
So, why not to try the same with crypto? However, we don't any central banks setting an interest rate here, nevertheless we do have exchanges which pay/charges a certain interest rate (at BitMex known as Funding Rate) to keep the supply and demand on their perpetual contracts stable. This funding rate is charged/paid every 8 hour period. Let's call this anomaly an 8 hour effect.
Thus, my motivation was to ask, whether traders who are long and the funding rate is negative, will rather close their position to avoid the additional payments. This should raise the contract supply and the price is assumed to drop from here.
With the following research question: Does an 8 hour effect (anomaly) exists on XBTUSD and ETHUSD contracts?
Initial research question was confirmed and there was an anomaly found. However, this anomaly does not happen before the funding rate is paid/charged. More oppositely, it happens right after the new funding rate is announced.
I also made a more "research paper" like post on medium if you were the type of guy who likes to see what's behind. It's here: BitMex Funding Rate Moving The Bitcoin Exchange Rate. I also have Jupyter notebook in which this analysis was conducted (in python), if you wanted to replicate the research yourself, let me know here on in pm, I can send it.
I've done some research on BitMex funding rate. The reason for this was simple, there are similar anomalies in the market caused by interest rates being paid/charged overnight, such a kind of strategy on FX is also known as carry trade and is proven to work by many research papers out there.
So, why not to try the same with crypto? However, we don't any central banks setting an interest rate here, nevertheless we do have exchanges which pay/charges a certain interest rate (at BitMex known as Funding Rate) to keep the supply and demand on their perpetual contracts stable. This funding rate is charged/paid every 8 hour period. Let's call this anomaly an 8 hour effect.
Thus, my motivation was to ask, whether traders who are long and the funding rate is negative, will rather close their position to avoid the additional payments. This should raise the contract supply and the price is assumed to drop from here.
With the following research question: Does an 8 hour effect (anomaly) exists on XBTUSD and ETHUSD contracts?
Initial research question was confirmed and there was an anomaly found. However, this anomaly does not happen before the funding rate is paid/charged. More oppositely, it happens right after the new funding rate is announced.
I also made a more "research paper" like post on medium if you were the type of guy who likes to see what's behind. It's here: BitMex Funding Rate Moving The Bitcoin Exchange Rate. I also have Jupyter notebook in which this analysis was conducted (in python), if you wanted to replicate the research yourself, let me know here on in pm, I can send it.