"The account assets automatically shrink every hour, not because of market fluctuations, but simply because I am shorting." Old Xu stared at the -0.18100% funding fee rate on the screen, bitterly calculating a sum.
In the middle of the night, trader Old Xu's screen glows dimly. His Bitcoin short position has been held for three days, the price hasn't changed much, but the account balance is like a leaking bucket, steadily decreasing.
"Here it comes again, the 18th time." At exactly 11:00 PM, the system automatically deducted. The position value is 10,000 USDT, and 18 USDT was taken in just one hour. This is merely because the funding fee rate is an astonishing negative -0.18100%.
He self-deprecatedly sent a message in the group: “I collected ‘protection fees’ 21 times in a day, the blood of the shorts is about to be drained, brothers. Those of you who went long are making a fortune, I see.”
01 The 'Draining' Rate
This phenomenon of incurring negative funding fees once an hour, Old Xu only witnessed during the extreme bull markets of 2021 and 2022. This means market sentiment is overwhelmingly bullish, and shorts need to pay fees to longs to balance the perpetual contract prices with the spot index.
The calculation formula is simple yet brutal: Position value × Funding rate = Hourly cost. A short position of 10,000 USDT incurs a cost of 18 USDT per hour, and with 21 times a day, that’s 378 USDT. Even if Bitcoin's price remains stable, shorts will be forced to cover due to this ongoing 'wear and tear'.
“It’s like struggling in quicksand; even if you don’t move, you will sink.” Old Xu understands that this is a manifestation of overheated market leverage sentiment. When everyone is crowded on one side of the trade, the system's balancing mechanism will begin to 'drain'.
02 Finding a Safe Haven
After being 'drained' for three consecutive days, Old Xu decided to change his strategy. He closed most of his short positions, but did not exit the market. He began to ponder a question: In such extreme volatility and systematic losses, is there a 'safe haven' that is not swayed by emotions and has completely transparent rules?
His gaze fell on Decentralized USD. This is not a traditional investment choice, but a transformation of infrastructure.
Unlike the contracts in centralized exchanges that are influenced by funding rates, market sentiment, and manipulation by large players, the true Decentralized USD derives its core value from absolute transparency of rules and immutability of mechanisms.
Taking USDD on the Tron network as an example, its stability does not rely on the long-short battles of traders, but is based on:
Over-collateralization mechanism: Every USDD is backed by assets like TRX, BTC, etc., that exceed its value, and all are verifiable on-chain.
Decentralized governance: Key parameters are decided by community voting, and no centralized institution can suddenly change the rules to 'harvest' users.
Algorithm and market arbitrage balance: By designing a well-functioning mechanism, ensure price stability anchored at 1 dollar.
“In the contract market, the rules are set by the exchange, and they can adjust them at any time; but in the world of Decentralized USD, the rules are written in code, inscribed on the blockchain, and apply to everyone equally.” Old Xu gradually understood the difference.
03 New Rhythm
Old Xu made a decision: he converted part of his funds, which were eroded by funding fees, into USDD. This was not giving up trading, but establishing a strategic rear.
He discovered the unique value of USDD in extreme market conditions:
When the market experiences an extreme negative funding rate again, he can hold USDD, completely avoiding the 'draining' mechanism, and calmly observe.
When a crash causes panic, USDD, as a stablecoin, serves as his 'preparatory ammunition' for bottom-fishing quality assets, and will not depreciate due to market fluctuations.
On regular days, USDD can participate in stable yield projects within the Tron DeFi ecosystem, generating 'positive cash flow' instead of passive 'negative loss'.
From being 'drained' by the rules to utilizing transparent rules to build advantages, Old Xu's mindset has completely changed. He no longer complains about the funding rate because he has stepped out of that game.
Now, Old Xu still pays attention to the market, but there is always a part of his position that consists of assets like USDD, which have transparent rules and are not bound by single market sentiment.
“I used to think making money was about guessing the ups and downs correctly, but now I think it's more important to choose the right battlefield.” He calmly wrote in the group, “In some battlefields, before you even start fighting, you are already bleeding.”
The real Decentralized USD offers a new battlefield with clear rules and no hidden losses. Here, your focus can be completely on judgment, rather than guarding against 'hidden arrows' from the rules themselves.
