I haven't really found a solid reason to get into margin trading myself, I'm more into perpetual futures. But I’ve noticed that sometimes, a low-value coin's funding rate can spike to around 2 or -2%, and it can happen with a funding time frame as short as an hour. Some folks might consider margin trading here since they can borrow funds at pretty low rates like 0.0003% to 0.00003% per hour.
There was one low-value coin I spotted with a high funding rate that I wanted to trade on margin, but I couldn't find it. This happened again just a few days ago, so it's not the first time.
I'm curious if anyone else has seen a high funding rate and thought about jumping into a position, only to realize they prefer margin trading because the borrowing costs are much less than the funding rate they’d be paying hourly? Every time I check the margin trading options to take advantage of these rates, I end up not finding the coins with those high funding rates in the margin market.
Most exchange knows about the low quality of those coins and that is why they list them on perpetual market and not the spot market, and because of the high risk speculations around those coins on perpetual future market, exchanges choose to give margin rate that is very high perpetual funding rate of 0.2%.
You can't see a margin borrowing rate below 0.0003% per hour which could amount into alot of interest paid on the borrowing.
Even with all of that, most coins that offers that borrowing are always exusted and out of liquidity in the pool, that is the main reason you rarely see that offers on most exchange.
There's no ''funding'' on margin spot market, it is just a borrowing rate, similar to borrowing money from a bank. It's annualised (even though charged every hour or every few minutes) and you can see it on the page where you borrow it. It is also flexible but in case of dollar stablecoins - predictable as it is tied to US T-bill yields.
You can borrow on a CEX or in a DeFi lending app like Aave, wherever fits you better and the rates are more attractive.
The difference with perp trading is that they won't let you borrow at a high leverage, usually like 2x-3x is max you can get because the collateral value must be high enough (their liquidation engines won't differently from perp platforms).
I have seen as little as 0.00004% before for bitcoin, but I have not seen lower than that before for USDT. Some exchanges will show the rate also on the margin trading account which can let people easily see the percentage that are changed. The percentage is different for each coins. If there is a need to let you know about this, I can look for the exchange and post a screenshot about it.