Recently, the price performance of tokens in the Perp DEX space hasn't been ideal. HYPE has dropped from its high to $21, LIT is holding at around $1.7, and there was an incident with ParaDEX. The entire sector seems a bit sluggish.
Interestingly, though, the hype around this space doesn't seem to have cooled down. On the contrary, many players are becoming even more active in farming projects that haven't launched their tokens yet. After all, a bear market is the best time to accumulate points, as things get much more competitive when the market heats up and tokens launch.
Two weeks ago, I wrote a project introduction titled "After Lighter, The Next Batch of Perp DEXs Worth Farming". I received a lot of feedback, especially from newcomers who now know which platforms are worth watching but are still confused about the specifics: how to operate, how to open/close positions, and how to maximize point weightings. Hence, this detailed, hands-on tutorial, which is perfect for beginners to get started. For demonstration purposes, I'll mainly focus on two Perp DEXs with decent trading volume and "https://oss.odaily.top/image/2026/01/23/05a304f3ae0c4e4d9e253f4039ca6d9e.png"/>
Currently, Variational only supports deposits of USDC on Arbitrum. Extended offers more choices for deposit chains, supporting Ethereum, Arbitrum, Base, BSC, Avalanche, and Polygon, but the token is still USDC.
Also, competition in the perp DEX space is quite fierce now, with various platforms offering special rewards for their referral mechanisms. Variational currently requires an invitation code to use. My invitation code is OMNI796TLUPK, or you can find one on Twitter. Higher-level invitation codes or ambassador codes may offer different levels of rebates or fee discounts. For example, on the Extended platform, referred users can enjoy a 10% discount on commissions until their total trading volume reaches $50 million.
II. Beginner-Friendly: Dual-Platform Hedging for Points
After completing the previous steps of depositing USDC and preparations, we now move to the practical operation: selecting a market, setting leverage, and placing orders. Here, we'll start with the simplest and safest hedging strategy to farm points.
The core principle is to hedge against price fluctuation risk by opening opposite positions on different DEXs. For example, go long on Variational while simultaneously going short with an equivalent size and leverage on Extended. This way, regardless of price movement, the profit/loss on both sides offsets each other. Your main cost is the trading fees, but you can steadily earn point rewards.
In terms of specific operations, because Extended's fee structure is more favorable for Maker orders (limit orders that provide liquidity), the optimal method is to first place a Maker order close to the market price on Extended to enjoy the platform's rebate. Then, once that order is filled on Extended, quickly open a Taker order (market order that takes liquidity) in the opposite direction on Variational to get filled immediately. This back-and-forth creates a hedged position. We essentially pay some platform fees, spread, and slippage in exchange for point rewards.
Here's another practical tip. In Variational's settings (top right), there's a "Play order fill sound" switch—remember to turn it on. Extended also has a "Disable sound" option in the top right—make sure NOT to check it. The benefit of this setup is that when your Maker order on Extended gets filled, you'll hear a sound prompt, allowing you to react immediately and place the Taker order on Variational. If you manage this time gap well, you can effectively reduce slippage losses caused by price movements.
When closing positions, set your take-profit and stop-loss prices in advance, which can be at the same risk-reward ratio or price levels. I'd suggest trying to keep the Extended account profitable while letting the Variational account incur a loss. Why? Because Variational has an interesting mechanism: after reaching the Bronze level (30-day trading volume of $1 million), there's a loss rebate lottery. Although the probability is low (between 0%-3%), the higher your level, the higher the chance. If you win, the rebate amount will be the lower of either 100% of the actual loss or 20% of the total loss compensation pool funds. So, keeping losses on the Variational account gives you a chance to recover some of them.
Once you're comfortable with this operation, you can increase the difficulty by widening the spread on Variational. (Spread is the difference between the bid and ask prices, representing the transaction cost for users entering a trade. A smaller spread means lower transaction costs.)
Even though Variational's weekly point weighting factors change slightly, the core principle remains: Variational profits through its Omni Liquidity Provider spread arbitrage mechanism. Variational itself is the only market maker on its platform. So, when you open a position on Variational, the platform charges a 4-6 basis point spread and simultaneously opens an opposite hedging position on external trading platforms, profiting from the price difference. Many experienced players have discovered through repeated testing that a wider spread means Variational earns more and, correspondingly, grants users a higher point weighting. This gives us an idea: to maximize point weighting, we need to find ways to increase the spread.
Based on the principles discussed earlier, we know ways to reduce the spread include trading major pairs like BTC or ETH and choosing times with good liquidity. Conversely, ways to increase the spread are: trading small-cap altcoins (they have wider spreads than majors) and trading during periods of low liquidity, such as weekends or Asian nighttime hours. This will yield a higher weighting. On top of that, you can further boost your metrics by varying the pairs traded (don't always trade the same one), increasing the number of trades, holding duration, and trade size to expand trading volume.
Besides common cryptocurrencies, platforms like Extended and edgeX also support trading traditional financial (TradFi) assets. Extended currently offers a relatively wider selection, covering six varieties including indices like the S&P 500 and NASDAQ, forex pairs like EUR/USD, precious metals like gold and silver, and commodities like oil. edgeX currently only lists the S&P 500 and Nvidia.
Since both platforms have the S&P 500 index, this presents another hedging opportunity. We can also perform wash trades between Extended and edgeX on the S&P 500 to diversify our trading system. The operation method is identical to the same-coin hedging between Variational and Extended described earlier: go long on one and short on the other to lock in risk and earn points. However, since TradFi assets involve market closure mechanisms, it's better to trade during US stock market hours for simpler operations.
III. Advanced Play: Long-Term Holding Strategy for Major Coins
The hedging strategies mentioned earlier for small-cap coins and TradFi assets, while offering high spreads and point weightings, have an obvious weakness—poor liquidity. This means such strategies are only suitable for short-term operations, quick in-and-out trades to boost volume, and are not ideal for long-term holding. After all, during periods of poor liquidity, price swings can be more volatile, and holding for too long increases risk.
Therefore, to make the overall trading system more robust and also to improve the "Holding Duration IO" metric (which is a very important factor for point weighting), we can incorporate some long-term holdings of major coins during times we're not actively monitoring the market. For example, before going to work during the day or sleeping at night, open some hedged positions on highly liquid majors like BTC and ETH, allowing the holding time to extend naturally.
In terms of specific operations, you could implement a hedging strategy between BTC and ETH on Variational. Observe the relative strength between these two coins. When one outperforms the other by 2-3%, go long on the underperformer and short the outperformer. The logic behind this strategy is that BTC and ETH have high long-term correlation, and short-term deviations often mean-revert. The holding period can be slightly longer, say 8 to 12 hours or even more. You can consider closing the position once one side starts to profit. Even if there's a temporary floating loss, don't rush to stop-loss; just hold according to plan.
The advantage of this strategy is that it compensates for the flaw of the previous strategy, which only used market orders on Variational. This strategy allows for more use of limit orders, making the activity appear more like genuine trading rather than volume farming.
However, a word of caution: even with major coins, it's not advisable to hold positions overnight. The crypto market runs 24/7, and if there's a sudden market crash or a black swan event, your hedged positions might get liquidated before you can adjust, which would be counterproductive. Also, don't use excessively high leverage; keeping it under 20x for majors is sufficient. Safety first.
Additionally, you can develop strategies based on Extended's vault features. Extended Vault Shares (XVS) have a clever design: 90% of the XVS value is simultaneously counted towards both your account equity and your available trading balance. This is more refined than what Hyperliquid offers.
Suppose you have 1000 USDC in your account; your equity and available balance are both $1000. When you deposit this 1000 USDC into the vault and receive an equivalent value of XVS, your equity and available balance become $900. Then, if you open a $1000 long position on BTC with 4x leverage, your equity remains $900, but your available balance becomes $650 ($900 minus the $250 margin requirement, which is $1000 / 4). If this BTC long position has a floating profit of $100, your equity increases to $1000, and your available balance correspondingly rises to $750. Throughout this process, your principal remains in the vault earning APR while simultaneously supporting your trading position.
The Extended vault's yield consists of two parts: Base Yield and Extra Yield, with a 30-day APR of 24.92%. Base Yield is available to all depositors and is currently 4.14% APR, reflected through the continuous appreciation of XVS price. The vault's revenue sources are similar to other Perp DEXs, primarily from market making, trading fees, and liquidation fees. Extra Yield is tied to the account's trading activity. Starting from the Knight level, you can enjoy extra yield, currently up to 20.78% APR.
IV. For the Pros: Funding Rate Arbitrage
The previous sections discussed hedging to farm points. Now, let's talk about a more advanced play: profiting from funding rate differences between platforms. The beauty of this strategy is that you not only earn points but also generate real profits. However, the operation is slightly more complex and not suitable for beginners.
Before explaining the strategy, let's define Funding Rate. Unlike traditional futures, perpetual contracts have no expiry date. To keep the contract price pegged to the spot price, exchanges designed a mechanism where longs and shorts periodically pay each other a funding rate. When market sentiment is bullish and the contract price is above the spot price, the funding rate is positive, meaning longs pay shorts. Conversely, when there's panic and the contract price is below the spot price, the funding rate is negative, meaning shorts pay longs.
Because the funding rate for the same asset can vary significantly across different platforms, this creates arbitrage opportunities. Ideally, you go long on the platform with the lower (or more negative) rate and short on the platform with the higher (or more positive) rate, collecting fees on both sides. But generally, finding a rate differential is sufficient for a trade, and the operation remains the same as before, with matching leverage and position size.
What are the benefits? First, after hedging long and short, you are completely neutral to BTC price movements; your total assets are unaffected by price changes. Second, you pay funding on your long position on Variational but receive funding on your short position on Extended. If Extended's rate is higher, you profit from the difference.
For example, on January 15th, the funding rate arbitrage opportunity for the IP token across different platforms reached an annualized rate of 953%. What does that mean? Hypothetically, if you invested $10,000, you could theoretically earn $9,530 in a year. Of course, this is an ideal scenario; funding rates fluctuate and cannot sustain such highs indefinitely. The BERA token had an arbitrage opportunity of 435% APR that same day. For specifics, you can refer to @0xfarmed's post.
In practice, these high-yield opportunities often appear in new tokens with low FDV (Fully Diluted Valuation). These tokens have small circulating supplies, making market sentiment prone to extremes, which leads to high volatility in funding rates.
This requires monitoring funding rates across different platforms to identify discrepancies in the perpetual contract markets. We can use tools like SmartArbitrage, which displays real-time arbitrage opportunities across platforms. Variational's API and Extended also have visual interfaces for rate comparison. Additionally, the Telegram bot @lighter_arbitrage_bot automatically pushes notifications for arbitrage opportunities. Once you notice the rate differential starting to narrow or one side's rate turning negative, you can consider closing the position.