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# Funding Rates

### Funding Rates

Relationship between funding rate and profit range and APY
The most important part of this strategy is the funding rate implied on the Entropy perpetuals exchange. The funding rate is determined by the difference between the midpoint of the exchange and the oracle price.
Higher funding rates means that the market expects high volatility in the future. Power perp buyers are willing to pay Volt#03 extra yield in return for a convex payoff similar to an option.
Higher funding rates means that underlying can move in a higher range before becoming unprofitable for Volt#03 depositor. At the extremes (30 bps a day), the net APY that the Volt depositors earn can be over 200%+ APY.

### Payoff

Volt #03 Payoff Diagram for BTC
Above is what a hypothetical Volt#03 position looks like with a 0.20% daily funding rate. This assumes BTC is trading at $50,000. The strategy makes the most money when BTC stays at$50,000, realizing 100%+ APY when it does so. This allows users to generate yield in rangebound crab markets.
The longer the user deposits in Volt#03, the wider the profit range becomes.

### Calculations

$Annualized Implied Volatility = \sqrt{1hr funding rate * 24 * 365}$