Recently, I noticed an arbitrage mechanism in ZKC that is worth analyzing. The spot and quarterly contract prices have diverged by about 1.2%, while the funding rate has shifted from negative to positive and is at a relatively high level.

The data looks very attractive. The spot price is quoted at 0.13 USDT, and the quarterly contract at 0.13156 USDT, locking in a 1.2% profit from the price difference. Plus, the current 1-hour funding rate is 0.05% (interest calculated over 8 hours). If the rate remains stable, the daily return could reach 0.15%.

The standard arbitrage approach is as follows: buy spot, while shorting an equivalent contract. The price difference and funding income become your locked-in profit. Roughly calculating a 3-day holding period: the price difference contributes 1.2%, the funding rate adds about 0.45%, totaling 1.65% gross return. After deducting bilateral trading fees of 0.2%, the net profit is around 1.45%. Annualized, this is indeed attractive.

But there is a major issue—spot trading volume has collapsed. The 24-hour decline is -86.8%, and liquidity is severely lacking. What does this mean? It means that when you want to buy spot, you may have to pay a worse price, and when closing your position, you might face slippage. The hedging costs could silently eat into some of your profits.

Therefore, the current judgment is: wait and see. Although the annualized figures look good, the liquidity risk completely offsets the arbitrage opportunity. Unless the price difference can stabilize above 1.5%, or the spot trading volume recovers to around 100 million, it’s not worth acting. The risk-reward ratio doesn’t match at the moment.