Funding Rate Arbitrage vs. Triangular Arbitrage: Which Is More Efficient?

When it comes to crypto arbitrage, two well-known strategies stand out - Funding Rate Arbitrage and Triangular Arbitrage. While both aim to profit from price differences, they work in very different ways. In this blog, we’ll break them down, compare them, and see which might be better depending on your goal.

What is Funding Rate Arbitrage?

Funding Rate Arbitrage is a type of delta-neutral strategy used in derivatives markets. It takes advantage of the periodic payments (called funding rates) made between long and short traders on perpetual futures exchanges.

Let’s say the funding rate is positive. That means long traders are paying short traders. So, you can:

• Buy a crypto asset on the spot market, and

• Open a short position on the perpetual futures market for the same asset.

Since your position is delta-neutral (price movements cancel out), your profit comes from collecting the funding rate.

Pros:

• Steady yield, often paid every 8 hours.

• Less exposure to price fluctuations.

• Easy to automate.

Cons:

• Requires active monitoring.

• Profits depend on funding rate staying positive.

• Not available on all exchanges.

What is Triangular Arbitrage?

Triangular Arbitrage happens on a single exchange where you spot a mismatch in prices between three trading pairs.

Example:

1. Use USDT to buy BTC.

2. Use BTC to buy ETH.

3. Convert ETH back to USDT.

If the rates between these pairs are slightly off, you might end up with more USDT than you started with and that is your profit.

Pros:

• Doesn’t require multiple exchanges.

• Fast and relatively low-risk.

• Capitalises on inefficiencies in highly liquid markets.

Cons:

• Profits are often tiny.

• Requires fast execution.

• Needs a bot or high-frequency trading setup to catch opportunities.

Which Strategy is More Efficient?

It depends on what you’re looking for:

For long-term, consistent passive income, funding rate arbitrage may be more efficient. For quick, opportunistic trades, triangular arbitrage could be ideal—but you’ll need speed and tech.

Now that you’ve understood the features of both these strategies, it is time to take your pick and develop your investing skills further based on it.

Before we sign-off, here is a small game for you.

Do you tick off all these boxes?

• You are looking for long-term gains.

• You want the strategy to be simple and feasible.

• You want it to be of minimal risk.

If yes, we have amazing news for you - we are sure Multipli will be a great fit for your portfolio.

How Does Multipli Use These Ideas?

Multipli is a platform designed to help you earn stablecoin yield using delta-neutral strategies like spot-perpetual and contango arbitrage. These methods aim to deliver consistent returns without worrying about market directions. All you need to do is try Multipli and let it do the grinding for you!

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