Basis = futures price − spot price. On dated futures, a positive basis reflects the cost of carry and the demand for leveraged longs, and it shrinks to zero by expiry. On perpetuals, the premium over the index is what drives funding. Traders watch the basis because it shows how much the market is paying for leveraged exposure.
Example
BTC spot is $60,000 and the future expiring in 90 days trades at $61,200. The basis is $1,200, or 2%. Annualised, that is about 2% × 365 ÷ 90 ≈ 8.1%. A trader who buys spot and shorts the future locks in roughly that return, minus fees, if both positions are held to expiry.
Why it matters
The basis tells you how stretched leveraged positioning is: a rising basis during a rally means traders are paying more to be long. It also underpins the cash-and-carry trade, one of the most common market-neutral strategies in crypto.
Common mistake
Treating a basis trade as risk-free. The short future can be liquidated in a sharp rally if it is not well margined, exchange risk remains, and on perpetuals the funding that pays you can turn negative.
Put it into practice
FAQ
- What does a negative basis mean?
- The future trades below spot, which is called backwardation. It usually points to heavy demand for shorts or hedges, often after sharp sell-offs.
- How is the basis related to funding?
- Perpetuals have no expiry, so instead of converging on a date, their premium over spot is paid out continuously through funding.
- What is a cash-and-carry trade?
- Buying spot and shorting a future that trades at a premium, then holding both until expiry, when the prices converge and the basis becomes the profit.