Funding ArbitrageYieldStrategy

Spot/Perp Funding Arbitrage: The Safest Way to Earn Yield in Crypto

FundingView TeamDecember 21, 20248 min read

What is Spot/Perp Funding Arbitrage?

Not sure what funding rates are? Read our complete guide to funding rates first.

Traditional funding rate arbitrage involves opening opposing positions on two perpetual exchanges - going long on one and short on another. While effective, this approach has limitations: you're exposed to liquidation risk on both sides, and your capital efficiency is reduced by margin requirements. For a complete breakdown of risks, see Is Funding Arbitrage Safe?.

Spot/Perp funding arbitrage is a more elegant solution. Instead of using two perpetual positions, you:

Buy the asset on spot (hold the actual cryptocurrency)
Short the perpetual on a DEX with positive funding rates

This creates a delta-neutral position where you're not exposed to price movements, but you collect funding payments from traders who are paying to maintain their long positions.

Why Spot/Perp is Superior

Capital Efficiency

With double-perp strategies, you need margin on both exchanges. With spot/perp:

Your spot position requires no margin (you own the asset)
Only your short perp needs margin
Overall capital efficiency improves by ~40-50%

Reduced Liquidation Risk

When you hold spot, there's no liquidation threshold. Only your short perpetual can be liquidated, and since you own the underlying asset, you can always:

Add more collateral if needed
Close the perp and sell your spot if the trade goes against you

Simpler Execution

Managing one perpetual position is simpler than managing two. You only need to monitor one exchange, one liquidation price, and one set of fees.

Step-by-Step Execution

Step 1: Identify the Opportunity

Use FundingView's dashboard to find assets with consistently positive funding rates. Look for:

Funding rate > 0.01% per 8-hour period (approximately 13% APR)
Stable funding over the past 7-30 days
Sufficient liquidity to enter and exit positions

Step 2: Buy Spot

Purchase the cryptocurrency on any exchange or DEX. Consider:

Centralized exchanges: Binance, Coinbase, Kraken
Decentralized options: Uniswap, Jupiter (Solana)

Transfer the assets to your wallet if needed.

Step 3: Short the Perpetual

Open a short position on a perpetual DEX. Popular options include:

Hyperliquid - Low fees, high liquidity
Paradex - Great XP rewards (read our Paradex Review)
Lighter - Competitive rates

Match your short size to your spot holdings for a perfectly hedged position.

Step 4: Collect Funding

Every 8 hours (or 1 hour on some exchanges), you'll receive funding payments. These payments are:

Automatically credited to your margin
Proportional to your position size
Tax-efficient in many jurisdictions (consult a professional)

Real Example: BTC Spot/Perp Strategy

Let's say BTC has a funding rate of 0.015% per 8 hours on Hyperliquid.

Component	Details
Spot Buy	1 BTC on Binance @ $100,000
Short Perp	1 BTC on Hyperliquid
8h Funding	0.015% × $100,000 = $15
Daily Yield	$15 × 3 = $45
Annual APR	~16.4%

Your net position: Zero BTC exposure, but earning ~16% APR on your capital.

The Bonus: XP and Airdrop Farming

Here's where it gets interesting. Many perpetual DEXs offer:

Trading Rewards

Paradex: Earn XP for every trade and position held
Hyperliquid: Points accumulation for potential airdrops
Lighter: Trading rewards program

Why This Matters

By running a spot/perp strategy, you're:

Earning funding yield (your primary income)
Accumulating XP just by holding positions
Positioning for airdrops without additional risk

This is why FundingView is adding a Spot section - to help you find the best spot markets to pair with your perp positions, maximizing both yield and reward accumulation.

Risk Management

Funding Rate Reversals

Funding rates can flip negative. Monitor your positions and be prepared to:

Close if funding turns consistently negative
Switch to different assets with better rates

Execution Costs

Consider all costs:

Spot trading fees (~0.1%)
Perp trading fees (~0.05%)
Withdrawal/deposit fees
Potential slippage

A general rule: only enter if your expected funding exceeds costs by at least 5x.

Exchange Risk

Spread your positions across multiple exchanges when possible. Never keep more than you can afford to lose on any single platform.

Using FundingView for Spot/Perp Strategies

FundingView makes finding these opportunities simple:

Dashboard: See real-time funding rates across all major DEXs
Strategy Page: Historical averages show which pairs have consistent positive funding
History Explorer: Deep dive into funding rate patterns
Coming Soon - Spot Section: Compare spot prices and liquidity across exchanges

The best funding arbitrage opportunities aren't always on the most popular assets. Use FundingView to discover hidden gems with exceptional risk-adjusted returns.

Conclusion

Spot/Perp funding arbitrage represents one of the safest ways to generate yield in crypto. By combining the security of spot holdings with the yield potential of perpetual shorts, you create a robust strategy that:

Generates consistent income
Minimizes liquidation risk
Accumulates exchange rewards
Requires minimal active management

Start exploring opportunities on FundingView's dashboard today, and keep an eye out for our upcoming Spot section that will make executing these strategies even easier.

This is educational content and not financial advice. Always do your own research and never invest more than you can afford to lose.