Frequently Asked Questions
About COPA
What is copa.digital all about?
Copa.digital is a specialized investment platform that enables investors to profit from funding rate discrepancies in the cryptocurrency futures market while maintaining a market-neutral position. By employing sophisticated trading strategies that mitigate directional risk, the platform offers risk-averse investors the opportunity to achieve stable returns. Copa.digital provides a secure and professional environment for managing investments in the dynamic world of cryptocurrency exchanges.
At copa.digital, we find and manage these specialized trades for you. All you need to do is pick the opportunities that align with your investment preferences, and we'll handle the rest—scanning exchanges, executing strategies, and managing risks—so you can potentially earn stable returns with confidence.
At copa.digital, we find and manage these specialized trades for you. All you need to do is pick the opportunities that align with your investment preferences, and we'll handle the rest—scanning exchanges, executing strategies, and managing risks—so you can potentially earn stable returns with confidence.
Development and Roadmap
What is the roadmap for copa.digital?
At copa.digital, we are dedicated to continuously enhancing our platform to better serve our users. Our roadmap includes the following key milestones:
1. Initial Release of Trading Opportunities
We will start by offering curated trading opportunities across major cryptocurrency exchanges. This will allow you to easily discover and select strategies that align with your investment goals.
2. Integration of One-Click Trading:
Next, we'll introduce seamless trading functionality. With one-click trading, you can execute your chosen strategies directly through our platform, simplifying the investment process and saving you time.
3. Expansion to Decentralized Exchanges:
We aim to broaden our offerings by integrating decentralized exchanges (DEXs). This expansion will open up a wider range of trading opportunities in the growing DeFi landscape.
4. Community Voting and Feature Suggestions:
Along the way, we'll implement a voting system that empowers you to suggest new features and vote on ideas. This ensures that our development aligns with the needs and desires of our user community, allowing us to integrate the most popular features that fit our vision.
Our roadmap reflects our commitment to providing a dynamic and user-centric platform. We're excited to bring these developments to you and look forward to your active participation in shaping the future of copa.digital.
Glossary
Funding Rates
In the cryptocurrency derivatives market, funding rates are essential mechanisms used to ensure that the price of perpetual futures contracts remains closely aligned with the underlying spot price of the cryptocurrency. Unlike traditional futures contracts, perpetual contracts do not have an expiration date, making funding rates crucial for maintaining price stability.
How Funding Rates Work
Funding rates are periodic payments exchanged between traders holding long and short positions in perpetual futures contracts. The direction and magnitude of these payments are determined by the difference between the perpetual contract price and the spot price.
- Negative Funding Rate: When the perpetual contract is trading above the spot price, the funding rate is negative. In this scenario, traders holding long positions pay those holding short positions. This encourages more shorts and fewer longs, helping to bring the perpetual price down towards the spot price.
- Positive Funding Rate: Conversely, when the perpetual contract is trading below the spot price, the funding rate is positive. Here, traders holding short positions pay those holding long positions. This incentivizes more longs and fewer shorts, pushing the perpetual price up towards the spot price.
Why Funding Rates Matter
Funding rates play a pivotal role in the perpetual futures market by:
- Price Alignment: They help maintain the equilibrium between perpetual contracts and spot prices, preventing significant discrepancies that could lead to market inefficiencies.
- Incentivizing Balance: By adjusting funding payments based on market sentiment, funding rates encourage traders to take positions that balance supply and demand, thereby stabilizing prices.
- Profit Opportunities: For sophisticated traders and applications, funding rates present opportunities to implement strategies like Funding Arbitrage, Basis Trades, and Reverse Basis Trades. By understanding and leveraging these rates, traders can generate consistent returns while managing market exposure effectively.
Basis Trades
A Basis Trade is executed when funding rates are positive, meaning that short position holders are compensated by long position holders. This scenario presents an opportunity to earn from the funding payments while maintaining a neutral stance on the asset’s price movements.
Here’s how it works:
- Short the Perpetual Future:
- You take a short position in the perpetual futures contract. With a positive funding rate, you receive payments from those holding long positions.
- Buy the Spot Asset:
- Simultaneously, you purchase the underlying cryptocurrency in the spot market. This action ensures that your overall position remains delta neutral, meaning that price fluctuations in the asset do not significantly impact your net position.
Benefits:
- Earn from Funding Rates: By shorting the perpetual future, you receive regular funding payments due to the positive funding rate.
- Risk Mitigation: Purchasing the spot asset offsets potential losses from adverse price movements, ensuring that your position remains balanced regardless of market volatility.
Inverted Basis Trades
Aa Inverted Basis Trade is employed when funding rates are negative, indicating that long position holders are paying short position holders. This situation allows traders to capitalize on the funding payments by adjusting their positions accordingly.
Here’s how it works:
- Long the Perpetual Future:
- You take a long position in the perpetual futures contract. With a negative funding rate, you receive payments from those holding short positions.
- Short the Spot Asset:
- Concurrently, you short the underlying cryptocurrency in the spot market. This maintains a delta neutral position, ensuring that price changes in the asset do not significantly affect your overall exposure.
Benefits:
- Earn from Funding Rates: By holding a long position in the perpetual future, you receive regular funding payments due to the negative funding rate.
- Risk Mitigation: Shorting the spot asset offsets potential losses from unfavorable price movements, keeping your position balanced and reducing market exposure risks.
Funding Arb Trades
Funding Arb or Funding Arbitrage is a strategic trading approach that capitalizes on discrepancies in funding rates across different cryptocurrency exchanges. This method allows traders to earn profits by simultaneously holding opposite positions on multiple platforms, thereby leveraging the variations in funding rates while maintaining a balanced exposure to the market.
How It Works
- Identify Funding Rate Discrepancies:
- Exchange A: Suppose Exchange A has a positive funding rate, meaning that traders holding long positions are required to pay fees to those holding short positions.
- Exchange B: Conversely, Exchange B exhibits a negative funding rate, where short position holders pay fees to long position holders.
- Execute Opposite Positions:
- Short on Exchange A: You take a short position in the perpetual futures contract on Exchange A. With a positive funding rate, you receive payments from long position holders.
- Long on Exchange B: Simultaneously, you take a long position in the perpetual futures contract on Exchange B. With a negative funding rate, you receive payments from short position holders.
- Maintain Delta Neutrality:
- By holding opposite positions (short on one exchange and long on another), you achieve delta neutrality. This means that your overall exposure to the cryptocurrency's price movements is minimized, allowing you to focus solely on earning from the funding rate differences.
Benefits
- Dual Income Streams: By leveraging funding rate differences on two exchanges, you can earn funding payments from both positions, effectively creating two income streams from a single strategy.
- Reduced Market Risk: Maintaining delta neutrality ensures that fluctuations in the cryptocurrency’s price have minimal impact on your overall position, allowing you to profit primarily from the funding rates.
Last 7 Days APR Chart
The Last 7 Days APR Chart offers traders a clear view of the net Annual Percentage Rate (APR) over the past week for various trading strategies in the cryptocurrency derivatives market. This chart helps assess the recent performance of trades by incorporating both funding rates and, where applicable, borrow costs.
Understanding the APR Calculation
The APR displayed on this chart is based on funding rates for perpetual futures positions and includes the average borrow rates when required, providing a comprehensive look at potential profits or costs. This approach is particularly useful for trades where funding rate differences or borrowing expenses are integral to the strategy.
- Standard Basis Trade: In a traditional basis trade—where a trader holds a long spot position and shorts perpetual futures—the APR calculation is derived solely from the funding rates on the short perpetual position. This reveals the income from maintaining a short futures position relative to the spot price.
- Inverted Basis Trade: An inverted basis trade involves holding a long position in perpetual futures while shorting the spot market. In this case, the APR calculation includes the average borrow rate within each funding window to account for the cost of holding a short spot position, giving a realistic view of net returns.
- Funding Arbitrage (Funding Arb) Trade: A funding arbitrage trade leverages funding rate discrepancies across exchanges. In this strategy, a trader goes long on the perpetual futures exchange offering the highest funding rates and shorts perpetual futures on an exchange with either the lowest funding rates or, ideally, negative funding rates. By capturing the difference in funding payments, traders can generate returns based on inter-exchange funding variations.
Why the Last 7 Days APR Chart Matters
The Last 7 Days APR Chart is an essential tool for traders engaging in these strategies, as it provides:
- Short-Term Profitability Assessment: By examining recent APR trends, this chart enables traders to evaluate the current profitability of their trades and adjust strategies based on recent funding and borrowing conditions.
- Cost-Adjusted Performance: For inverted basis and funding arbitrage trades, the inclusion of borrow rates or inter-exchange funding rate differences offers a true picture of net APR, allowing traders to assess actual returns after accounting for these costs.
- Market Sentiment Insight: Funding and APR changes over the past week can indicate shifts in market sentiment. For instance, a rise in funding rates on one exchange versus another can reveal where demand is concentrated, helping traders optimize their arbitrage and basis strategies accordingly.
This chart thus equips traders with actionable insights into recent APR behavior across strategies, supporting informed decision-making in the dynamic derivatives market.