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How Does the Funding Rate Create an Arbitrage Opportunity for Market Participants?

Arbitrage occurs when the funding rate is high enough to cover transaction costs. An arbitrageur can simultaneously take a long position in the spot market and a short position in the perpetual swap market (or vice versa).

They collect the funding rate while the basis (swap minus spot price) remains relatively stable, locking in a profit.

Can a Funding Rate Ever Be Zero, and What Would That Imply?
How Do Arbitrageurs Exploit Price Discrepancies between OTC and Exchange Markets?
What Is the Risk of “Time Lock Expiration” in an Atomic Swap?
What Is a ‘Perpetual Swap’ and How Is Its Funding Rate Used in Hedging?