How Do Arbitrageurs Utilize the Funding Rate Mechanism?

Arbitrageurs seek to profit from the temporary misalignment between the perpetual contract price and the spot price, often by exploiting the funding rate. For example, if the funding rate is highly positive, an arbitrageur might short the perpetual contract and simultaneously buy the equivalent amount of the spot asset.

They collect the funding rate payment while the combined position is hedged, profiting from the rate itself.