Basis Trades Explained: Spot, Futures, and the Carry Between Them

Dated futures contracts on crypto assets usually trade at a different price from spot. The difference — the basis — reflects the cost of carrying the asset until expiry and the balance of demand for leveraged long versus short exposure. When the futures price is above spot the market is said to be in contango; when it is below, in backwardation.

The cash-and-carry trade

If a futures contract trades meaningfully above spot, a participant can buy the asset in the spot market and sell the future. At expiry the two prices converge, and the position earns the initial basis, less costs. Because the position is hedged against price direction, it resembles a fixed-income return — which is why basis is often compared with prevailing interest rates.

Why the return is not free

• Margin risk: the short futures leg can require additional collateral during a rally, even though the combined position is hedged.
• Venue and custody risk: spot and futures legs often sit on different platforms.
• Execution risk: entering and exiting both legs costs spread, fees, and market impact.
• Capital cost: the capital tied up could earn a return elsewhere.

For perpetual futures, which have no expiry, the equivalent carry is paid continuously through funding rather than realized at convergence. Comparing annualized dated-futures basis with annualized perpetual funding is a useful consistency check: large, persistent differences between the two usually indicate constraints on arbitrage capital.

“Basis is the market’s price for leverage. When it is high, someone is paying a lot to be long.”

This publication is provided for informational purposes only and does not constitute investment, legal, or tax advice, or an offer or solicitation to buy or sell any asset. Live figures are computed from third-party public market data and may be delayed, incomplete, or inaccurate.