How much is the overnight fee for Bithumb contracts

Overnight fees on Bithumb contracts are influenced by market conditions, risk-free interest rates, and premiums or discounts, and can significantly impact trading strategies and profitability.

Nov 19, 2024 at 10:01 am

Understanding Overnight Fees in Bithumb Contracts

Overnight fees, also known as financing fees, are charges incurred by traders who hold open positions on Bithumb contracts beyond the daily settlement time. These fees represent the cost of borrowing or lending the underlying asset during the overnight period.

Factors Affecting Overnight Fees

Several factors influence the calculation of overnight fees on Bithumb contracts:

• Underlying Market Conditions: Market conditions, such as supply and demand, can affect the cost of borrowing or lending the asset.
• Risk-Free Interest Rate: The risk-free interest rate is the rate at which traders can borrow or lend money without assuming any risk. This rate serves as a benchmark for overnight fees.
• Premium or Discount: Overnight fees can reflect a premium or discount compared to the risk-free rate. A premium indicates that traders are willing to pay more to hold long positions, while a discount indicates they are willing to pay less to hold short positions.

Calculation of Overnight Fees

To calculate the overnight fee for a Bithumb contract, the following formula is used:

Overnight Fee = (Contract Size * Futures Price * Funding Rate) / 8

• Contract Size: The size of the contract being traded.
• Futures Price: The current market price of the futures contract.
• Funding Rate: The predetermined funding rate set by Bithumb for each contract.

Flexible Funding Mode

Unlike some centralized exchanges, Bithumb offers traders the flexibility to choose between two funding modes: flexible and time-weighted.

• Flexible Funding: Overnight fees are charged on a rolling basis throughout the day at predetermined intervals. This mode provides traders with more control over their funding costs.
• Time-Weighted Funding: Overnight fees are accumulated over the entire holding period and charged at the end of the trading day. This mode simplifies the funding process but may not be as cost-effective for short-term positions.

Impact of Overnight Fees

Overnight fees can have a significant impact on trading strategies and profitability:

• Holding Long Positions: Traders who hold long positions may pay an overnight fee if the funding rate is positive, which increases the cost of holding their position.
• Holding Short Positions: Traders who hold short positions may receive an overnight fee if the funding rate is negative, providing additional income.
• Scalping and Day Trading: Overnight fees can erode the profitability of scalping and day trading strategies if a significant portion of the trading day is spent holding open positions.