funding-rate-arbitrage

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funding-rate-arbitrage

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Hackathon Winner for the Scaling Web3 Hackathon. Funding rate arbitrage for future perpetuals. Farm fund rates from different DEX's depending on the perp.

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# Crypto Perpetuals Funding Rate Arbitrage

Welcome to the Crypto Perpetuals Funding Rate Arbitrage project! This project was done for the Encode Scaling Web3 Hackathon. It focuses on arbitraging funding rates across different decentralized exchanges (DEXs) for perpetual contracts. The program retrieves funding rates, compares them, and applies arbitrage strategies to maximize profit.
<p align="center">
  <img src="public/crypto_cat.png" alt="Crypto Cat" width="400"/>
</p>

## What's Funding Rate Arbitrage?

In the world of perpetual futures, funding rates are like a seesaw between long and short positions. These rates are periodic payments that help keep the perpetual price in sync with the spot price. But here's where the fun begins: funding rates can differ across various DEXs, creating opportunities for savvy traders to play the arbitrage game.

Picture this: DEX A has a positive funding rate, while DEX B has a negative one. This means that on DEX A, longs are paying shorts, and on DEX B, shorts are paying longs. It's like a funding rate tug-of-war!

To seize this arbitrage opportunity, you'll want to go short on DEX A (where the funding rate is higher) and long on DEX B (where the funding rate is lower). This way, you'll be collecting the higher funding rate on your short position while paying the lower funding rate on your long position. It's a delightful dance of funding rates that can lead to profitable arbitrage if executed correctly.

So, get ready to ride the funding rate waves and join the perpetual futures arbitrage party!

## Features

- Fetches funding rates from multiple DEXs
- Compares funding rates across exchanges
- Executes arbitrage strategies to profit from rate differences
- Supports various DEXs and perpetual markets
- Modular design for easy extension and customization

## Getting Started
To start working with the project, clone this repository and install the required dependencies.

```bash
# Clone the repository
git clone https://github.com/ksmit323/funding-rate-arbitrage.git

# Change to the project directory
cd funding-rate-arbitrage

# Install dependencies
pip install -r requirements.txt
```

## Usage

The Funding Rate Arbitrage program provides a user-friendly interface to interact with various features and perform funding rate arbitrage across multiple decentralized exchanges (DEXs). Upon running the `main.py` script, you'll be presented with a menu of options:

### Main Menu

Upon running the `main.py` script, you'll be presented with the main menu, where you can choose from various options:

### Option Details

1. **View USDC balances on each DEX**
  - This option displays your available USDC balances on the supported DEXs, including Orderly, Hyperliquid, and ApexPro.

![balances](https://raw.githubusercontent.com/ksmit323/funding-rate-arbitrage/main/public/balances.png)

2. **View open positions**
  - Select this option to view your currently open positions across all the integrated DEXs.

3. **Close positions**
  - Here, you can close your existing positions on a specific DEX by providing the asset symbol (e.g., ETH).

4. **Cancel Open orders**
  - This option allows you to cancel all open orders on a selected DEX.

5. **Start Funding Rate Strategy**
  - This is the main feature of the program, where you can perform funding rate arbitrage. Upon selecting this option, you'll have the following choices:

- **View rates on all available DEXs**
    - Displays the current funding rates across all supported DEXs.

- **View top 3 rate differences from Orderly**
    - Shows the top 3 funding rate differences compared to Orderly.

![fr_differences_against_Orderly](https://raw.githubusercontent.com/ksmit323/funding-rate-arbitrage/main/public/fr_differences_against_Orderly.png)

- **View top 3 rate differences from all DEXs**
    - Displays the top 3 funding rate differences across all integrated DEXs.

![fr_differences_across_all_DEXs.png](https://raw.githubusercontent.com/ksmit323/funding-rate-arbitrage/main/public/fr_differences_across_all_DEXs.png)

- **Execute Strategy**
    - This option allows you to execute the funding rate arbitrage strategy by following these steps:
      1. Enter the asset symbol you want to trade (e.g., ETH).
      2. Select the DEX you want to short on.
      3. Select the DEX you want to long on.
      4. Enter the order quantity.
      5. Review and confirm your choices.
    - If confirmed, the program will execute the funding rate arbitrage strategy by shorting on the selected DEX and longing on the other DEX, taking advantage of the funding rate difference.

![order_filled](https://raw.githubusercontent.com/ksmit323/funding-rate-arbitrage/main/public/order_filled.png)

6. **Exit**
  - Choose this option to exit the program.

Throughout the program's execution, you'll see clear prompts and instructions to guide you through the process. The interface aims to be user-friendly and intuitive, making it easy for you to navigate and perform the desired actions.

## Project Structure
```bash
.
├── main.py           # Entry point for the application
├── public            # Contains the images for the README.md
├── README.md         
├── requirements.txt  # Project dependencies
├── src               # Source code for the project
│   ├── apex          # Apex DEX implementation
│   ├── hyperliq      # Hyperliq DEX implementation
│   ├── orderly       # Orderly DEX implementation
│   └── strategies    # Arbitrage strategies
```
## Improvements

While the Funding Rate Arbitrage project provides a solid foundation for executing funding rate arbitrage strategies across multiple DEXs, there is always room for improvement and additional features. Here are some potential areas for future enhancements:

- **Automated Strategy Execution**: Implement a fully automated system that continuously monitors funding rates across DEXs and executes arbitrage strategies without manual intervention.

- **Portfolio Management**: Incorporate portfolio management features, allowing users to track their overall positions, profits/losses, and risk exposure across multiple DEXs and strategies.

- **Advanced Order Types**: Support for more advanced order types, such as trailing stops, stop-losses, and take-profit orders, to better manage risk and optimize profits.

- **Backtesting and Simulation**: Develop a backtesting and simulation module to test and refine arbitrage strategies using historical data before deploying them in a live environment.

- **Expanded DEX Support**: Integrate with additional decentralized exchanges to increase the range of arbitrage opportunities and diversify the trading ecosystem.

- **User Interface Enhancements**: Improve the user interface and experience by adding visual aids, such as charts and graphs, to better represent funding rate data and trade information.

- **Improved Error Handling and Logging**: Enhance error handling and logging mechanisms to better diagnose and troubleshoot issues that may arise during the execution of arbitrage strategies.

If you have any suggestions or ideas for improvements, feel free to open an issue or submit a pull request. Contributions from the community are highly welcomed and appreciated.

## Acknowledgements

I would like to thank the organizers of the Encode Scaling Web3 Hackathon and the **Orderly** Network for providing this opportunity to explore the fascinating world of perpetual futures markets.  Orderly provided an excellent SDK for easy integration.

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