Entry
- Monitoring: check the funding rate of the chosen perp (lucrative when positive)
- Open long spot (e.g. BTC/USDC) in size X
- Open short perp (BTC-PERP) in identical notional size
- Both simultaneously, with as little slippage as possible
Exit
- Exit when funding turns negative for an extended period (cost > gain)
- Exit on exchange risk (liquidity problems, insolvency rumors)
- Rebalance when the spot/perp notionals diverge (due to perp mark movement)
| Name | Typ. value | Description |
|---|---|---|
| min_funding_apr | 10% | Minimum funding value to enter (after fees) |
| max_position_pct | 30% account | Cap due to exchange-risk concentration |
| funding_interval | 1h or 8h | Platform-dependent (Hyperliquid: 1h) |
Pros
- Market-neutral - theoretically zero directional risk
- Well-documented real-world performance (widely used institutionally)
- Scales with capital
- Crypto-specific edge without equity-market competition
Cons
- Exchange risk (FTX 2022 was the biggest warning)
- Funding can turn negative in bear markets
- Basis risk: spot and perp can diverge briefly (liquidation cascades)
- Capital is tied up in both legs -> lower efficiency than pure directional
Core idea
Perpetual futures have no expiry - to anchor their price to spot regardless, there are funding payments: every 1h (Hyperliquid) or 8h (Binance, BitMEX) the 'more expensive' side pays the 'cheaper' one. In practice longs are usually more expensive (the leverage appetite of retail speculators) -> longs pay shorts.
Whoever is spot long and perp short in identical size: - Directional risk = 0 (gain in spot = loss in perp and vice versa) - Collects funding net - Stays in as long as funding stays positive
This is the cash-and-carry or delta-neutral funding trade.
Quantitative evidence
- BIS Working Paper (2023): crypto carry shows persistent yields of ~7-8% p.a. on average, with spikes in bull phases.
- Q3 2025 funding data: over 92% of all funding periods had positive rates on BTC and ETH.
- Institutional cases: Securitize reported 20.71% APY via BTC cash-carry with BlackRock BUIDL as collateral.
- Post-ETF rally 2024: premiums of 15-30% annualized on quarterly CME BTC futures.
Mechanics on Hyperliquid
Hyperliquid pays funding every hour. A rate of 0.01% per hour corresponds to ~87% APY (unadjusted) - such spikes are rare but possible in bull phases. Average funding on BTC-PERP Hyperliquid: ~0.005-0.010% per hour, i.e. ~4-9% APY.
For true delta-neutral you would need: - Spot BTC: on a CEX or DEX outside Hyperliquid - Perp short: on Hyperliquid - Collateral management: both sides with sufficient margin
Alternatively: if Hyperliquid eventually lists spot BTC (already partly the case), hedge locally.
Risks
- Exchange counterparty: FTX (Nov 2022) showed that even 'safe' exchanges collapse. Never 100% on one venue.
- Funding flipped: in strong bear markets (2022 Q2-Q3) funding was persistently negative -> you pay instead of collect.
- Basis divergence: in extreme moves spot and perp can briefly diverge by 2-5% -> temporary MtM losses.
- Gas/withdrawal: with on-chain rebalancing, fees eat into the return.
Performance expectation
| Regime | Funding APR |
|---|---|
| Bull (strong) | 15-40% |
| Ranging | 5-10% |
| Bear (mild) | 0 to -5% |
| Bear (panic) | -10 to -30% (short-term) |
Long term: 8-12% APY is realistic with clean execution and risk hedging.
Relevance for Botty
Very high. Botty's Hyperliquid perp infrastructure covers 50%; the spot leg would need a second venue (Binance, Coinbase) or Hyperliquid spot. A funding-arb module would be conceptually simple (funding > threshold -> open pair; funding < 0 -> close pair), but architecturally a larger effort.