Definition
A basis trade is a trading concept that focuses on the price differential, or “basis,” between an asset in the spot market and its corresponding futures or perpetual futures contracts. The basis reflects how derivatives prices deviate from the underlying asset’s current market price, often due to factors such as funding rate dynamics, leverage demand, and market expectations. In crypto markets, basis trades are typically structured to be market-neutral, aiming to isolate this price differential rather than directional exposure to the asset itself.
Because the basis is influenced by derivatives positioning, open interest, and the cost of holding exposure through futures or perpetual futures, it can move independently of the underlying asset’s spot price. A basis trade conceptually involves taking offsetting positions across spot and derivatives markets to capture this spread. The trade’s core idea is to monetize the convergence or persistence of the basis while minimizing sensitivity to outright price moves in the underlying asset.
Context and Usage
In crypto derivatives markets, basis trades are closely tied to the structure of futures and perpetual futures pricing relative to the spot market. When derivatives trade at a premium or discount to spot, the basis quantifies that divergence and becomes a target for specialized traders. The presence of significant open interest in derivatives markets can amplify or sustain these pricing gaps, shaping the attractiveness and risk profile of basis-oriented strategies.
Funding rate mechanisms in perpetual futures are a key driver of the basis over time, as they influence the cost or benefit of holding long or short positions in those contracts. As a concept, a basis trade does not prescribe a specific implementation, but rather describes a family of market-neutral approaches centered on the systematic exploitation of spot–derivatives price differentials. It is most relevant in markets where derivatives liquidity, leverage usage, and structural demand imbalances cause persistent or volatile deviations between spot and futures pricing.